Without incentives there is no paradise: Part Four

Dołączył: 09 Mar 2024 Posty: 1

In his June 3 Blog, Mallen Baker der important to highlight. Their main message is that these financial incentives are an inferior solution. What is important for the company, and probably the most sustainable, is that the company has the values that make these incentives unnecessary, that responsible practices are part of the daily actions of executives as part of their own values. To do this, it is not enough for the company to have a declaration of values (which probably few know, such as codes of ethics), but for all its hiring and promotions to include the actions of employees based on the company's values. He advocates that institutions that make rankings of corporate responsibility do not give so much importance to the existence of these incentives and rather evaluate the implementation of values in decision-making and behavior. In a way we could say that the existence of these incentives based on the achievement of sustainability indicators are an indicator that the company needs to offer incentives for responsible behavior. Which is not something natural.

Which raises doubts about the company's responsibility. In Phone Number List the first of the two articles, dated June 12, 2010, I commented on this: What's more, there are those who allege that bonuses linked to performance, whatever they may be, are harmful. For example, Akerlof and Kranton (in Identity Economics, George Akerlof and Rachel Kranton, Princeton University Press, 2010) go so far as to say that performance-related pay shows that the company does not trust its employees to do the right thing, that they must be encouraged. for them to do it. They claim that employees want to do a good job because it is the right thing to do and when these bonuses are introduced they make them think that they are doing things that go beyond their obligation and encourage them to take more risks than necessary to achieve the bonus and carry out activities that can be harmful. See the case of the impact of bonuses on behavior in some financial institutions In the third of the articles, dated March 30, 2011, he mentioned examples of perverse financial incentives, which produce the opposite behavior than expected. However, not all companies have a culture and values that make these incentives unnecessary. The vast majority do not have them and you cannot switch to this culture overnight and implement the values, no matter how many codes are adopted.

Hence, in the transition of the vast majority of companies, it is necessary to establish these incentives as a way to move towards making them unnecessary. But if these incentives are not accompanied by a program for the development and implementation of values, they will become permanent and the company will have to continue “buying” responsible behavior. Incentives alone would be a suboptimal solution. It is also appropriate to remember what we pointed out in the second article and that is that although executive decisions are critical for responsible practices, action and implementation occur at lower hierarchical levels. Hence the importance of extending incentives and the development program and maintaining values at all levels. Financial incentives are not a panacea, they should not be permanent. They should be an instrument for the transition to a culture of values and the use of non-financial incentives, more aligned with personal values, which he particularly recommended in the second of the articles. Antonio Vives With a Ph.D. in Financial Markets from Carnegie Mellon University and with a career as a professor at 4 business schools, Antonio Vives is currently a professor and consultant at Stanford University. Principal Partner of Cumpetere . Former Sustainable Development Manager of the Inter-American Development Bank. Creator of the Inter-American Conferences on CSR. Author of numerous articles and books on CSR and the Cumpetere blog in Spanish.

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