Compensation Bonus

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- Rewarding Performance: Differentiating pick performers from average

- Creating Clarity: Simplifying the plans

- Managing costs: Controlling cost of sales under various performance scenarios

- Alignment: Ensuring that compensation plan meets business objective

The effect on its success in the bidding war for top brokers can be:

- This may result in the combined company being unable to reach the desired targets in terms of cost-savings

- The larger the potential target, the bigger the risk to the acquirer. A company may be able to withstand the failure of a small-sized acquisition, but the failure of a huge purchase may severely jeopardize its long-term success.

- Discretionary bonus system arises where brokers are about to change the compensation policies into objective incentive system in which pay is based on formula

4 No Answer

The incentive and sorting effect is different with that of bank of America in which they focuses on motivating the best talent and its compensation and benefits package has been designed to stay competitive with the market and to attract, retain, motivate and reward employees at every stage of their life and help them plan for tomorrow. It relies more on human capital of its employees to compete in the competitive environment where the compensation plan is focus towards encouraging long term stock ownership by employees and to further identify the interests of employees along with the stock holders of the company. Top Merrill executives contributed a part of their bonuses from the prior year to an incentive plan that was then converted into stock. If Merrill did well, the firm doled out more shares to the employees at the end of each year.

Bank of America followed a different pay strategy to the employees, as it acquired Merrill company then it has to compensate the employees of the company as they used to compensate before .Bank of America Merrill Lynch’s corporate clients will have increased access to the cross-border payments capabilities needed to enhance their global competitiveness. The bank’s clients will benefit from an expanded set of countries as well as faster, more transparent and cost-efficient payments that are deeply integrated with Bank of America, and Merrill brokers appear to be opposed to cross-selling, both because they are concerned it could undermine their relationships with their clients and they prefer to have their pay determined by objective measures. Thus, the changes in the compensation strategy of both the companies might affect the pay system of Bank of America.

Works Cited

Milkovich, G., Newman, J., & Herhart, B. (2011). Compensation. Newyork: The McGraw-Hill companies,Inc.

Park, S., & Michael C., S. (2012). cornell. Retrieved from scholarship.sha.cornell.edu: http://scholarship.sha.cornell.edu/cgi/viewcontent.cgi?article=1121&context=articles