Research Perspective

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Managing Compensation Effectively in Banking:

Ensuring Accuracy and Compliance with Regulations

Establishing Credibility in Compensation

Worldwide the banking and financial services industry has been under continuous scrutiny for decades. This scrutiny has its roots in a number of banking crises, some institutional in nature but others the result of people acting inappropriately in an attempt to acquire compensation incentives. For example, we have seen headlines concerning mortgages and credit extended to unqualified customers; creation of fraudulent accounts without customer approval; and overpayment of bonuses and incentives prior to revenue being recognized. This negative exposure has created an environment in which banks and other financial institutions feel themselves challenged to restore credibility in the eyes of the public and those that oversee them.

One key to doing so is to demonstrably take control of the all aspects of the compensation process, including performance incentives. The benchmark research we’ve done on compensation management makes clear that a top priority for financial services organizations in improving compensation is related to enterprise incentives; more than two in five of them (42%) identified this as their number-one priority. Doing so fits into a context: The research shows that three-fourths (77%) of participants believe it is important or very important to embrace an approach to compensation that addresses all aspects of it.

 
 

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