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“Incentive schemes heighten risk of corruption”

12th October 2016, London  New report from Transparency International UK highlights that incentive schemes can lead to bribery, corruption and other unethical conduct.

The report “Incentivising Ethics: Managing incentives to encourage good and deter bad behaviour” comes in the wake of Wells Fargo agreeing to pay US$185 million in settlements to US regulators over admissions that, in order to meet sales targets, employees of the bank had created around two million unauthorised customer accounts and credit card applications since 2011.

Whilst noting that incentive schemes are an important part of encouraging appropriate behaviour from staff, the report highlights that pressure to meet targets, the imperative to “get the job done” and the need to win business have frequently led to shortcuts, resulting in various forms of corrupt and unethical behaviour.

Peter van Veen, Director of Transparency International UK’s Business Integrity Programme, said:

“As the allegations surrounding the creation of fake accounts at Wells Fargo show, getting your incentive structure wrong can have dire consequences for your company.  Companies have invested heavily in anti-bribery, anti-money laundering and anti-fraud systems but if the incentives encourage staff to act only in the short-term interest then those investments are likely to be severely compromised.”

“Some industries still rely heavily on financial incentives and, not surprisingly, those also are the industries that struggle to ensure ethical behaviour in their ranks.  We hope this report is a useful contribution in addressing this challenging area.”

Key recommendations include:

  • Incentives should be linked to the company’s overall business strategy and aligned with the company’s values, code of ethics and compliance programme
  • Incentive schemes should actively encourage ethical behaviour through the use of non-financial targets that reflect and drive ethical behaviour
  • Companies should consult with staff to make sure targets are realistic and achievable and to find out where things are going wrong

***ENDS***

Contact:
Dominic Kavakeb
Dominic.kavakeb@transparency.org.uk
020 3096 7695
0796 456 0340

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Read 268 times Last modified on Wednesday, 12 October 2016 10:40

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