Incentives, Ethics and Bonus Structures

Abstract

A variety of analogical literature is reviewed to ascertain oscillations in the collected works to determine a symphonic solution that is emancipatory of all incentives to conduct unethical manipulations of financial disclosures. The etymological question is how to structure an incentive plan for accountants to deter unethical decisions, whilst maintaining the EBITA/Revenue matrices that are required of accountants. As an accounting manager at a Houston firm, this issue is of personal interest and critical importance. This study examines bonus structures and concludes that incentive plans have no place in accountant, CFO and Director compensation, if the end goal is to ensure compliance with accounting standards. The antidote to unethical accounting practices is to pay key-players at a competitive rate without the incessant need for extrinsic motivators. This study fills in the empirical gap of literature that eradicates employee’s extrinsic monetary motivators and determines that the answer to this ethical dilemma is to elect employees that are intrinsically motivated, as this is the pinnacle of excellence.

Keywords: bonus structures, incentives, accounting, unethical accounting

JEL Classification: M20, M40, M41