Structuring incentives and pay to produce positive behaviour

Annual appraisals for financial services staff increasingly focus less on revenue generation and more on meeting specified performance criteria. Ian Fraser discusses how both the ‘carrot’ and the ‘stick’ are being used to transform the industry’s troubled relationship between remuneration and conduct.

Kweku Adoboli, the trader convicted of fraudulent activity at UBS, said in August 2016 that bankers’ conduct has not changed since his conviction in 2012 and similar frauds could happen again because young bankers are “still struggling with the same issues, the same conflicts, the same pressures to achieve no matter what”. He said, “I think it could absolutely happen again.” Adoboli’s view is that until banks are more honest about culture and systemic risk we will not get closer to fixing the root of the problem and that change needs to be driven by senior management.