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Impact of Bankers Bonuses on the Economy - Research Paper Example

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Summary
 This paper discusses the impact of bonuses in the banking sector on the economy. The aim of this study is to evaluate the compensation and bonus level of the executives in the banking sectors, so as to identify whether they are one of the underlying reasons for the financial crisis or not…
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Impact of Bankers Bonuses on the Economy
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Impact of Bankers Bonuses on the Economy

Download file to see previous pages... A qualitative analysis would be conducted in order to accomplish the objectives of this research study, for which both primary as well as secondary data would be collected. The secondary data would be collected through authentic print as well as online sources, while for collecting primary data; a focus group interview would be conducted among 10 respondents.The spectacular collapse of financial institutions and banks has raised questions that link the bank executives and the payments that they received for their performance. Thomas Philippon and Ariell Reshef in their research report had mentioned that in the year 2000, the salary that the executives received in the banking sector were augmented by about 40 percent, in spite of having the same qualification (Fox, 2009). They were also offered stocks and other equity options in order to avoid their practice of short-termism. It was found that the level of pay of the executives increased dramatically in comparison to the non-executives (The Independent, 2009). Standard & Poor 500 stated that the average total pay of the CEOs has increased to 10.5 million during the year 2008 from $850,000 in the 1970s. 1.2 Research Problem The research problem revolves around bankers’ bonus and its effect on the economy. This is because it was found that even during the economic crisis when the banks were collapsing, their bankers were receiving the hefty bonus for their performance, which is an underlying cause of financial crisis. 1.3 Research Aim and Objective The aim of this research paper is to identify the relationship between bankers’ bonus and the global economy. In order to fulfill this aim, the objective of the researcher would be to analyze the payment structure in the banking sector, which also includes the bonus. Secondly, the cause and effect of bonus payment on the financial status of the banks during the financial crisis would be also examined. Thirdly, the issues would be identified in order to present the wrong practices if any in this regard. 1.4 Research Questions The research questions have been formulated in line with the aims and objectives of this research study; they are stated below: Q1: Did the bankers receive a bonus during the financial downturn? If yes, then how much? Q2: What was the financial status of the banks which distributed bonus to its executives? Q3: What payment of bonus to bankers an underlying reason which added to the financial crisis?  Bankers’ bonuses are awarded to the workers in the banking and finance industry, which was traditionally paid at the end of the year with the intention of rewarding employees. This was a way to appreciate their contribution to the growth and development of the organization. However, the present scenario of bankers’ bonus can be better explained through Peter Ducker’s words. He stated that when the bosses themselves get over indulged in the corporate trough, they tend to lose respect in the organization.   ...Download file to see next pagesRead More
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