How do the Bankers Bonuses Affect the Investment Behaviour - Research Paper Example

Section 1 - Secondary Research Log Group members 1 2 3 4 (The boxes below should be expanded electronically) 1.1 Write the given research question here How do the bankers’ bonuses affect the investment behaviour? 1.2 Expand on and define the terms in the research question. Identify the main topic in the question and the specific focus of that topic. Note down the conceptual area/s of the Dewey System you might expect to find the main topic in the research question (75-150 words) The bankers’ bonuses are often paid annually to the finance industry workers as a reward towards motivating their behaviour with the aim of increasing the bank’s profitability. The research mainly focuses on the effects bankers bonuses on banking investments. From the first instances, there was a wide agreement that bankers’ bonuses had a positive impact of the behaviours of managers and traders. However, the concerns and the perception have changes and numerous controversial ideals have changed the bankers’ bonuses ideologies significantly. Therefore, the research aims at identifying and analysing the effects of bankers’ bonuses to the banking investment especially in relation to the performance of the banks. 1.3 Make a bulleted list of keywords and search strings, which you feel, will generate results in the hunt for information. Add to this list as your search progresses and you identify other keywords. The main aim of the bonus banking is to balance long term and short-term value creation and satisfying accountability of the stakeholders with the intent of attracting, retaining, and motivation talent. However, what is the underlying reality of this motivational system. The research shall answer this concern through seeking responds to the following question: What where the perceived benefits of bankers bonuses What has led to the changes of the earlier perceptions? Why it created and what are its roles in the normal time Are the current concerns in favour of eradicating bonus payments (as a penalty for bad performance among the managers)? Are bonus payments the genesis of financial crisis in the bank? Are there plans to eradicate the bankers’ bonuses? If so, what are the estimated or expected consequences? Otherwise, why is it important to retain bonus banking despite the challenges? 1.4 Include here any relevant research from monographs on the shelves of the RC library (relevant information from a single monographic source should be paraphrased/summarised in 150-250 words but you may include more than one monographic source if available) Include end-of-text Harvard references. In the journal, Banker’s pay structure and Risk, John Thanassoulis addresses the contrasting problems facing the banks and bankers. According to Thanassoulis, these contrasting banking problems are embedded in the competitive labour market where the banks are seeking best talents. Additionally, Thanassoulis notes that banks often use various motivation efforts that vary with the remuneration. However, the introduction of the remunerations motivations make banks risk shifting problems by creating incentives that will only inflate early earnings of the managers. In most cases, the management of some bonuses are of deferred optimally. Thanassoulis further notes that there is an intense increased competition between banks for bankers. This phenomenal is increasingly becoming expensive to manage thereby banks risk shifting problem than the moral of the problem. Thanassoulis notes that further growth in such competitions to some strong levels will only permit some banking institutions to have maximum risk shifting. He demonstrated that this banking motivation catastrophe could be analysed through balance sheets. Thanassoulis, J. (2011). Department Of Economics Discussion Paper Series: Banker’s Pay Structure And Risk. London: University of Oxford press. Retrieved December 13, 2012 from http://economics.ouls.ox.ac.uk/15182/1/paper545.pdf 1.4.1 Insert here scanned copies of the relevant pages used to make the summaries in 1.4 Kindly use this Links 1. http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_201-250/WP209_revised3.pdf (page 5-7) 2. http://economics.ouls.ox.ac.uk/15182/1/paper545.pdf (10-13) 3. http://www.ddiworld.com/DDIWorld/media/white-papers/AssessmentCenterMethods_mg_ddi.pdf?ext=.pdf (page 8) 4. http://www.haygroup.com/downloads/uk/misc/bonus_banking_uk.pdf (page 1-3) 1.5 Include here relevant research from research papers in journals using the library databases (each named group member to contribute a paraphrased summary [100-150 words] of 2 research papers within the library databases. For each source, author name, date, title, title of journal and numeration should be clearly indicated through an end-of- text Harvard reference. Many people have found it ridiculous to pay bankers massive bonuses. Kahei Kawamura said in his journal that it is quite immoral and unrealistic to pay large bonuses to bankers or bank executives yet other citizens find it hard to make ends meets in trying have their daily basic needs. Additionally, there are numerous feelings that paying a bonus to backers might have a contributor in the global recession. The problems of bankers’ bonus is not a one country problem, but cut across globally; thus, making the issue a global issue. For instance, according to wall street and London’s square journal, investment bankers in Australia are benefiting from vast bonuses yet they increasingly work some outside deals. The momentous bankers that have global influence are highly affecting the global economy due to their increased bankers’ bonuses. Kawamura, K. (2009). Bankers' bonuses: morality vs. Reality. Retrieved December 13, 2012 from http://www.journal-online.co.uk/article/6110-bankers-bonuses-morality-vs-reality Tan, J. (July 19, 2012). Deal Journal Australia: UBS Pays Healthy Bonuses to Australian Bankers. London: Wall Street. 1.5.1 Insert here copies/screenshots of the relevant pages from which summaries were made in 1.5 (these should be clearly cross-referenced) Use the same links as 1.4.1 above, to take same screen shorts 1.6 Include here relevant research from Proquest sources (each named group member to contribute a paraphrased summary [100-150 words] of one newspaper article. For each source, author, date,, title of newspaper should be clearly indicated through an end-of- text Harvard reference) The British government wants to introduce anger vote over bankers’ payment. There is a concern that the some of the bankers are paid over stgPounds one trillion or 1.1 trillion Euros. This research work revealed that the monitory is often obtained from the public funded supports that could have been using to bridge the financial gab created during the great depression. Notably, the research further revealed that the British government seeking to introduce policing powers to the committee in order to increase their responsibility in curbing any possibility of financial crisis. British government to get tough on bankers' bonuses. (2009, Nov 29). Sunday Business Post. Retrieved from http://search.proquest.com/docview/818356939?accountid=45049 Bhoir, A. 2010, Citibank, and Bank of America cut bonuses, hike salaries in India: The move is aimed at avoiding attention on bonuses after an outcry across the world over the huge pay of bankers, Washington, United States, Washington. 1.6.1 Insert here copies/screenshots of the relevant pages from which summaries were made in 1.6 (these should be clearly cross-referenced) Use the following links 1. http://search.proquest.com/docview/818356939?accountid=45049 2. http://search.proquest.com/business/docview/458772244/13AF8689C24BFC2E8E/20?accountid=45049 1.7 Include here any relevant research from textbook sources on the shelves of the RC library (relevant information from a single textbook source should be paraphrased/summarised in 150-250 words but you may include more than one monographic source if available) Include end-of-text Harvard references. Bonus banking systems are incentive schemes used by banks to earn bonus that are in turn held in the account. These bonuses are later used to pay bankers. In most according to Ehrbar (1998; pg. 110) and Castillo and Mcaniff (2006; pg. 89), bonus banking allows negative declaration that sometimes relates to performance drop thereby giving a wrong reflection of initial assessment of performance return. However, in most cases, bonus banking gives the bank the benefit with certain security to repay. Nonetheless, it is upon the compensation committee to work out acceptable approach towards motivation the bankers or the traders. It should be noted with concern that the bonus banking is difficult to implement since it is unpopular among many employees and quite inefficient in dividing performance. Therefore, the bonus may be paid even to the lowly performing bankers thereby demeaning the primary intention of the practice. 1. Ehrbar, A. (1998). EVA: the real key to creating wealth. New York [u.a.], Wiley. 2. CASTILLO, J. J., & MCANIFF, P. J. (2006). The recruiting guide to investment banking. Solana Beach, CA, Circinus Business Press. 1.7.1 Insert here scanned copies of the relevant pages used to make the summaries in 1.7 Kindly use these links to google books used in this study 1. http://books.google.co.ke/books?id=RC9r8skmAO0C&pg=PA110&dq=bonus+banking&hl=en&sa=X&ei=tn7JUI3YG8vEsgaaroDYDw&ved=0CDYQ6AEwAQ#v=onepage&q=bonus%20banking&f=false (page 108- 102) 2. http://books.google.co.ke/books?id=GZ6RqWIG04wC&pg=PA87&dq=bonus+banking&hl=en&sa=X&ei=tn7JUI3YG8vEsgaaroDYDw&ved=0CDMQ6AEwAA#v=onepage&q=bonus%20banking&f=false (page 86-90) these are links to the page books and exact pages as per reading if the research 1.8 Include here any relevant research from websites (relevant information from a single website source should be paraphrased/summarised in 100-150 words but you may include more than one website). Include end-of-text Harvard references and state why you feel each website is a reliable source. According to Barrow, the Britain’s bankers among other financial workers often received over 13 billion pounds last year in the form of bonuses while the rest of the citizens are struggling to make ends meet. This claim was as per the official statistics of 18 September 2012. Furthermore, there are claims as per the article that critics accuse bankers of living parallel life or living in a parallel universe. The bankers make a lot of money regardless of these actions leading deep financial crisis that cause intense suffering to the ordinary workers. However, according to Gehrig and Menkhoff, regardless of bonus banking being greedy, irresponsible, and ill behaviour, it should also be considered a valuable tool in guiding managers towards right corporation and even business society. 1. Barrow, B. (2012). Outrage over £13bn lavished on bonuses for bankers while the rest of us struggle to make ends meet. Retrieved from http://www.dailymail.co.uk/news/article-2205583/Outrage-13bn-lavished-bonuses-bankers-rest-struggle-make-ends-meet.html 2. Gehrig, T. & Menkhoff, L. (2009). The bright side of bonuses. Retrieved from http://www.voxeu.org/article/are-bankers-bonuses-all-bad 1.8.1 Insert here scanned copies of the relevant pages used to make the summaries in 1.8 Kindly use these links to make the scan copies of the above articles article 1. http://www.dailymail.co.uk/news/article-2205583/Outrage-13bn-lavished-bonuses-bankers-rest-struggle-make-ends-meet.html 2. http://www.voxeu.org/article/are-bankers-bonuses-all-bad 1.9 Include here any relevant additional information from audio or visual media (relevant information from, for example, a radio or TV programme should be paraphrased/summarised in 100-150 words but you may include more than one source). Include end-of-text Harvard references. According to the BBC business news (13 July 2010; 14:32 GMT), banks should be restrained from bonus banking systems. According the new, a treasury minister has directed banks to restrain from paying bonuses especially at a time when the private and public sectors are struggling to cut labour costs. Mark Hoban, the financial secretary, needed banks to provide fair and stable ways of allocating bonuses for years 2010. He also added that the government was working on the modalities towards taxing banks’ profits. BBC business news revealed that the European Parliament approved in the 2010 on the maximum bankers’ bonuses for years that followed. The general understanding of the BBC businesses news regarding this issue is that the bankers’ bonuses is not economical good for all being of the national and international economy 1. BBC business News. (13 July 2010). Bank bonuses 'must be restrained'. 14:32 GMT, retrieved from http://www.bbc.co.uk/news/1060647. Section 2 – Synthesis 2.1. In this section, further reduce the summaries in section 1 to summaries 20-30 words in length. Each summary should give the gist of the source. Note down an appropriate in-text reference next to each summary. Bonus banking is an incentive schemes used by banks to earn bonus that are in turn held in account to buy their employees (Ehrbar 1998; pg. 110) and (Castillo and Mcaniff, 2006; pg. 89). Different quarters of economy regard this banking system as economically unfriendly; thus, should be eradicated or controlled (BBC Business News, 2010). 2.2 Re-organise/cut-and-paste/re-group these summaries into coherent groups which could form the basis for paragraphs Bonus banking systems are incentive schemes used by banks to earn bonus that are in turn held in the account. These bonuses are later used to pay bankers. In most according to Ehrbar (1998; pg. 110) and Castillo and Mcaniff (2006; pg. 89), bonus banking allows negative declaration that sometimes relates to performance drop thereby giving a wrong reflection of initial assessment of performance return. However, in most cases, bonus banking gives the bank the benefit with certain security to repay. Nonetheless, it is upon the compensation committee to work out acceptable approach towards motivation the bankers or the traders. It should be noted with concern that the bonus banking is difficult to implement since it is unpopular among many employees and quite inefficient in dividing performance. Therefore, the bonus may be paid even to the lowly performing bankers thereby demeaning the primary intention of the practice. The bankers bonuses are often paid annually to the finance industry workers as a reward towards motivating their behaviour with the aim of increasing the bank’s profitability. The research mainly focuses on the effects bankers bonuses on banking investments. From the first instances, there was a wide agreement that bankers’ bonuses had a positive impact of the behaviours of managers and traders. However, the concerns and the perception have changes and numerous controversial ideals have changed the bankers’ bonuses ideologies significantly. Therefore, the research aims at identifying and analysing the effects of bankers’ bonuses to the banking investment especially in relation to the performance of the banks. Many people have found it ridiculous to pay bankers massive bonuses. Kahei Kawamura said in his journal that it is quite immoral and unrealistic to pay large bonuses to bankers or bank executives yet other citizens find it hard to make ends meets in trying have their daily basic needs. Additionally, there are numerous feelings that paying a bonus to backers might have a contributor in the global recession. The problems of bankers’ bonus is not a one country problem, but cut across globally; thus, making the issue a global issue. For instance, according to wall street and London’s square journal, investment bankers in Australia are benefiting from vast bonuses yet they increasingly work some outside deals. These momentous bankers that have global influence are highly affecting the global economy due to their increased bankers’ bonuses. According to the BBC business news (13 July 2010; 14:32 GMT), banks should be restrained from bonus banking systems. According the new, a treasury minister has directed banks to restrain from paying bonuses especially at a time when the private and public sectors are struggling to cut labour costs. Mark Hoban, the financial secretary, needed banks to provide fair and stable ways of allocating bonuses for years 2010. He also added that the government was working on the modalities towards taxing banks’ profits. BBC business news revealed that the European Parliament approved in the 2010 on the maximum bankers’ bonuses for years that followed. The general understanding of the BBC businesses news regarding this issue is that the bankers’ bonuses is not economical good for all being of the national and international economy. According to Barrow, the Britain’s bankers among other financial workers often received over 13 billion pounds last year in the form of bonuses while the rest of the citizens are struggling to make ends meet. This claim was as per the official statistics of 18 September 2012. Furthermore, there are claims as per the article that critics accuse bankers of living parallel life or living in a parallel universe. The bankers make a lot of money regardless of these actions leading deep financial crisis that cause intense suffering to the ordinary workers. However, according to Gehrig and Menkhoff, regardless of bonus banking being greedy, irresponsible, and ill behaviour, it should also be considered a valuable tool in guiding managers towards right corporation and even business society. Additionally, the British government wants to introduce anger vote over bankers’ payment. There is a concern that the some of the bankers are paid over stgPounds one trillion or 1.1 trillion Euros. This research work revealed that the monitory is often obtained from the public funded supports that could have been using to bridge the financial gab created during the great depression. Notably, the research further revealed that the British government seeking to introduce policing powers to the committee in order to increase their responsibility in curbing any possibility of financial crisis. In the journal, Banker’s pay structure and Risk, John Thanassoulis addresses the contrasting problems facing the banks and bankers. According to Thanassoulis, these contrasting banking problems are embedded in the competitive labour market where the banks are seeking best talents. Additionally, Thanassoulis notes that banks often use various motivation efforts that vary with the remuneration. However, the introduction of the remunerations motivations make banks risk shifting problems by creating incentives that will only inflate early earnings of the managers. In most cases, the management of some bonuses are of deferred optimally. Thanassoulis further notes that there is an intense increased competition between banks for bankers. This phenomenal is increasingly becoming expensive to manage thereby banks risk shifting problem than the moral of the problem. Thanassoulis notes that further growth in such competitions to some strong levels will only permit some banking institutions to have maximum risk shifting. He demonstrated that this banking motivation catastrophe could be analysed through balance sheets. Bonus banking is an incentive schemes used by banks to earn bonus that are in turn held in the account to buy their employees (Ehrbar 1998; pg. 110) and (Castillo and Mcaniff, 2006; pg. 89). Different quarters of economy regard this banking system as economically unfriendly; thus, should be eradicated or controlled (BBC Business News, 2010). 2.3 Write a paragraph plan for your synthesis, based on your re-organised groups in 2.2 Bonus banking systems are incentive schemes used by banks to earn bonus that are in turn held in account. The collected bonuses are later used to pay bankers. In most cases, bonus banking accelerates negative declaration in relation to performance drop thereby giving a wrong reflection of initial assessment of performance return. Therefore, bankers’ bonus is not a good way of motivating, attracting, and retaining talents in the banking institutions as earlier eluded by the primary concepts or underlying theory describing the process. Additionally, this type of banking system is a selfish form of handling economy since it circumnavigate around few individuals, the bankers but disregarding other labour markets. Thus, it should be eradicated, disregarded, or controlled for fairness in the economy. 2.4 Now write the synthesis including in-text citations and end-of-text Harvard references (350 – 450 words excluding references) Bonus banking systems are incentive schemes used by banks to earn bonus that are in turn held in account (Ehrbar, 1998; pg. 109). The collected bonuses are later used to pay bankers. In most cases, bonus banking accelerates negative declaration in relation to performance drop thereby giving a wrong reflection of initial assessment of performance return BBC Business News, 2010). Therefore, bankers’ bonus is not a good way of motivating, attracting, and retaining talents in the banking institutions as earlier eluded by the primary concepts or underlying theory describing the process (Barrow, 2012; pg. 01). Additionally, this banking system is a selfish form of handling the economy since it circumnavigates around few individuals, the bankers but disregarding other labour markets (Gehrig and Menkhoff, 2009). Thus, it should be eradicated, disregarded, or controlled for fairness in the economy. References Barrow, B. (2012). Outrage over £13bn lavished on bonuses for bankers while the rest of us struggle to make ends meet. Retrieved from http://www.dailymail.co.uk/news/article-2205583/Outrage-13bn-lavished-bonuses-bankers-rest-struggle-make-ends-meet.html BBC business News. (13 July 2010). Bank bonuses 'must be restrained'. 14:32 GMT, retrieved from http://www.bbc.co.uk/news/1060647 Bhoir, A. 2010, Citibank, and Bank of America cut bonuses, hike salaries in India: The move is aimed at avoiding attention on bonuses after an outcry across the world over the huge pay of bankers, Washington, United States, Washington. British government to get tough on bankers' bonuses. (2009, Nov 29). Sunday Business Post. Retrieved from http://search.proquest.com/docview/818356939?accountid=45049 Castillo, J. J., & Mcaniff, P. J. (2006). The recruiting guide to investment banking. Solana Ehrbar, A. (1998). EVA: the real key to creating wealth. New York [u.a.], Wiley. Gehrig, T. & Menkhoff, L. (2009). The bright side of bonuses. Retrieved from http://www.voxeu.org/article/are-bankers-bonuses-all-bad Kawamura, K. (2009). Bankers' bonuses: morality vs. Reality. Retrieved December 13, 2012 from http://www.journal-online.co.uk/article/6110-bankers-bonuses-morality-vs-reality Tan, J. (July 19, 2012). Deal Journal Australia: UBS Pays Healthy Bonuses to Australian Bankers. London: Wall Street. Thanassoulis, J. (2011). Department Of Economics Discussion Paper Series: Banker’s Pay Structure And Risk. London: University of Oxford press. Retrieved December 13, 2012 from http://economics.ouls.ox.ac.uk/15182/1/paper545.pdf Read More