Business Case Study: The Gaines Company

A bonus plan is a great way for employers to entice individuals to join their company, as well as stimulate production goals of current employees; unfortunately, “there can be unintended consequences and unanticipated effects” (Mayhew, 2016, n.p.). The Gaines Company implemented a bonus program as a way to motivate their employees (Edmonds, Olds, & Tsay, 2008). The managers would be given a bonus equal to 10 percent of any excess difference between the projected net present and actual net present values. The manager of the Gaines Company, Victor Holt, demonstrated how the implementation of a bonus program which was intended to boost performance can heed unethical conduct, which often times has residual effects on an organization. There are many different types of bonus programs available, for example, sign-on bonus, retention bonus, and cash incentives, to name a few. Extrinsic bonuses, which are usually financial, can end up costing the company revenue if the employees conduct does not meet ethical standards. “When strong financial incentives are in place, many employees will cross ethical boundaries to earn them, convincing themselves that the ends justify the means” (Wharton School, 2011, n.p.). In our case study, Mr. Holt did just that; he was aware of the 10 percent bonus based upon the difference between the projected and actual net present value. I believe he was well aware of the company’s ability to produce; however, he low-balled his …show more content…
Tsay, B.. (2008). Fundamental Managerial Accounting Concepts, 5th edition. McGraw-Hill/Irwin.

Mayhew, R. (2016). Long-term Effects of a Bonus Plan on a Company. Retrieved October 19, 2016 from http://smallbusiness.chron.com/longterm-effects-bonus-plan-company-20824.html

Warton School. (2011). The Problem with Financial Incentives — and What to Do About It. Retrieved October 19, 2016 from