Facebook Pixel Code
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

The System of Long-Term Incentives

This is a preview of the 10-page document
Read full text

The bailout money was last resort for banking industries with which they could try to resurrect; it would be a faulty decision if organizations utilize this money to serve the top executives. Scholars recommended that provision of bonuses as a percentage of bank’ s profit would enhance banking operations as it ensured financial flexibility of banks. Melissa Murray, a spokeswoman for Wells Fargo suggested that it was good to adopt “ pay-for-performance” culture where executives are treated on the basis of their performance (Freifeld, 2009). As a response to all critics, long-term incentives system has been established.

Under this system, the total compensation of employees includes base pay, short-term incentives, and long-term incentives. Base pay constitutes the fixed salary given to an employee for the specified job. Similarly, short-term incentives include all types of annual incentives and ordinary commissions those earned by an employee. Coleman and Fortier (2002) opine that unlike the base pay and short-term incentives methods, the long-term incentives aim the “ improvement of overall performance of the organization by linking employees’ long-term rewards to the organization’ s long-term results” . It mainly includes stock options, performance units, and restricted stock.

The appropriate selection of long-term incentive programs assists the organization to meet its long-term objectives. In addition, the introduction of suitable long-term incentives system in banking industries will add value to the shareholders as well as banks’ customers. The major advantages of long-term incentives are described below. Berger and Berger (324) suggest that this programme facilitates the banks to share the success with its executives; and it would ensure the active employee participation as employees get the feeling that they are the valuable part of the organization.

Such a feeling will drive the executives to take all possible efforts in order to lift their firm to the top of the corporate world. Similarly, long-term incentives policies motivate executives to take certain levels of risks which would contribute to the rapid growth of banks.

This is a preview of the 10-page document
Open full text
Close ✕
Tracy Smith Editor&Proofreader
Expert in: Business, E-Commerce, Management
Hire an Editor
Matt Hamilton Writer
Expert in: Business, Finance & Accounting, Macro & Microeconomics
Hire a Writer
preview essay on The System of Long-Term Incentives
WE CAN HELP TO FIND AN ESSAYDidn't find an essay?

Please type your essay title, choose your document type, enter your email and we send you essay samples

Contact Us