Abstract
Monetary incentive schemes are gaining increasing importance in German savings banks. In the first section of our paper we derive the necessity for monetary incentives on the basis of the traditional principal-agent-framework. Section two defines the various elements of an incentive scheme as well as the requirements to practicability in general. Those elements are demonstrated at the example of Stadtsparkasse Koln (Commercial and Savings Bank of Cologne) in section three. They have an incentive scheme in place since the beginning of the 1990s. Practical experiences and the limits of incentive schemes in particular are discussed in section four. The major shortcomings identified are a certain short-term-focus and a focus on individuals’ personal interests or those of a particular entity within the company. Finally, we discuss the reasoning of Reinhard K. Sprenger who denies the necessity for monetary incentive schemes at all.
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