Unintended consequences of financial incentives

Posted on August 08, 2019 by Ujjal Gupta, One of Thousands of Leadership Coaches on Noomii.

Financial incentives, in reality, negate the growth of high potential individuals in the corporate world. It is like a red herring that leads such individuals to wrong directions while they pursue fulfilment in life.
It is therefore surprising to me that corporations throughout the world continue with this ineffective incentive system at the top leadership level, such as, CEOs and CXOs. And they do so despite the visible adverse impact on the individual as well as on the corporation.
The corporate scandals at the turn of the century, such as, WorldCom, Enron, etc., are examples of how top management pursued financial incentives and corrupted the system in the process. While this may have led to more stringent corporate governance practices and transparent financial reporting systems, it did not eliminate the craving for and pursuit of money, status and power from being the key drivers in the corporate world today.
The worldwide economic turmoil of 2008 was triggered by financial greed of investment bankers driven primarily by financial incentives. A renowned and wealthy ex-top executive of a world’s leading consulting firm fell prey to this craving for more wealth, having lived through financial incentive systems throughout his career. News items in India these days continue to report, without respite, on similar stories in banks, aviation sector, telecom sector, etc., involving large business groups.
Financial incentives lead to more money, higher status, increased adulation from society and more power. The unintended consequences are that it fuels greed and ingrains pursuit of money, status etc., into the DNA of the corporate world. This then prevents highly capable individuals from pursuing personal growth and seeking meaning, purpose and fulfilment in life to reach the level of self-actualisation, at the top of Maslow’s hierarchy of needs.
Do you think that organisations do benefit, in the true sense of the term, when its top management is incentivised by money, power and status and not by pursuing meaning, purpose and fulfilment? Will it be worthwhile for organisations to ensure pursuit of fulfilment for its employees especially at the top-most leadership level?
Here is a thought. What will happen if, the remuneration package of the top leadership is modified to include, apart from fixed salary and variable financial incentives, a support system to pursue self-actualisation of each individual leader? This may include providing the services of a personal coach to every leader. The coach will support the leader to develop self-awareness and determine his or her path to self-actualisation, that is, finding meaning, purpose and fulfilment in work and in life.
What can be some other and better ideas for organisations in order for them to attract, retain and motivate top leaders by incentivising them with personal growth and fulfilment leading to self-actualisation and beyond? What are your thoughts on this?

(Originally published on Linked In on 8th June 2018)