Minimizing Top Management’s Corruption : Delaying Bonus Compensations

In an imperfect world, it is very challenging to control corruption of top executives and boards of directors. The general rule is that members of the top management and boards of directors are compensated with large sums of annual bonuses, depending on the corporate financial performance of the previous year. Therefore, top management and boards of directors have incentives to make decisions that have high positive impacts to the corporation in the short-term. Nonetheless, many of those decisions may impact the corporation negatively in the long-term, even yielding to an eventual bankruptcy, but management's only incentive is to make decisions with short-term positive impact. This paper provides a conceptual alternative method of delayed corporate compensation, where the annual bonus is not compensated immediately depending on the financial performance of the corporation in the previous year, but is delayed many years to prove that past management has made decisions for the positive long-term performance of the corporation