Long live the bonus bank!

Sharing opportunities and risks – the revival of an old, but beguilingly simple idea.

Stern Stewart & CO. GmbH
Salvatorplatz 4
80333 Munich

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At present, there are hardly any issues more sensitive than that of management remuneration – and with good reason, as the causal research into the current economic crisis shows.

However, the somewhat understandable anger does not necessarily lead to wise solution proposals. Management certainly do not consider the salary cap and the consequent abandonment of profit-sharing to be responsible for the risks incurred. By the same token, nor can the objective of remuneration be to strip management of their belief in the opportunities presented by corporate decisions.

There is no doubt that the “standard remuneration model” is insufficient to satisfy realistic requirements, not just for supervisory board and management board banks, but also to an extensive level within the organization.

Truly entrepreneurial remuneration systems thus satisfy three key criteria:

1. Clarity in the definition and measurement of success

2. Rewarding only sustainable, long-term value enhancement

3. Sharing the entrepreneurial opportunities, but also the risks

The magnitude of the crisis now provides the freedom to dispense with traditional remuneration systems in the organization, and to achieve real and sustainable management sharing of opportunities and risks.

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