Executive bonuses have long been used to align leadership behavior with company performance. By tying compensation to clear financial and strategic goals, businesses aim to ensure top executives make decisions that drive shareholder value. However, recent events, such as the collapse of Credit Suisse, are forcing companies, regulators, and the public to re-examine the’ legitimacy, fairness, and long-term impact of these high-stakes incentives.
The Key Question: Why Do Executive Bonuses Exist?
- Motivate CEOs and top management to achieve measurable results.
- Drive growth aligned with both short-term goals and long-term strategy.
- Retain and attract top leadership talent in competitive global markets.
- Create a sense of ownership and accountability at the highest level
When implemented responsibly, performance-based bonuses can be powerful levers for value creation and strategic alignment.
The Hidden Risks of Bonus Culture
However, the bonus model is far from flawless. Common criticisms include:
- Short-termism: Bonuses can encourage executives to prioritize quarterly results over sustainable value.
- Risky behavior: Pressure to meet bonus-linked targets may drive reckless or unsound decisions.
- Public backlash: Bonuses awarded for poor performance or corporate collapse can spark public outrage.
- Reputational damage: Perceived excess or unfairness erodes stakeholder trust, especially when taxpayer money is involved.
The Credit Suisse case: What happened and why it’s crucial to rethink bonuses
In March 2023, Credit Suisse was forced into an emergency acquisition by UBS, supported by Swiss government intervention. In the aftermath, the Swiss Federal Department of Finance (FDF) moved to reduce or cancel bonuses for around 1,000 senior executives.
However, in May 2025, the Swiss Federal Administrative Court ruled the move unlawful, citing that the bonuses were contractually guaranteed and protected under property rights. The court also noted that government support had officially ended by August 2023, making further intervention legally unjustifiable.
While the decision was grounded in law, it reignited the ethical and political debate around executive compensation during corporate failure and public bailouts.
Taxpayer-Funded Bailouts Raise the Stakes.
When a company is rescued with public funds, the debate over executive bonuses moves beyond shareholder value. Taxpayers become de facto investors, and they demand accountability. The Credit Suisse case highlights a deeper systemic issue: without pre-existing legal frameworks or contract provisions, governments may have no legal grounds to block or reclaim executive bonuses, even when public money is at risk.
The Path Forward: Aligning Compensation with Accountability.
To prevent similar situations in the future, we need to rethink how executive bonus structures are regulated and enforced, especially in systemically important sectors like banking and finance.
- Strengthen Bonus Clawback Mechanisms
Executive contracts should include clear clawback clauses and bonus adjustment triggers that activate during crises, insolvency, or government intervention.
- Establish Legal Provisions for Bailout Cases
Governments must be empowered to suspend or reclaim bonuses when public funds are used to stabilize private companies. This requires explicit legislation, not post-crisis improvisation.
- Promote Transparency and Stakeholder Involvement
Stakeholders—including investors, employees, and in some cases the public—deserve a say in how top executives are compensated. Greater transparency builds trust and mitigates reputational risk.
Leadership in Crisis: A Call for Ethical Reflection
Legally, executives may be entitled to their bonuses. Ethically, the matter is more complex.
When a company fails, and stakeholders suffer—whether shareholders, employees, or taxpayers—executives should weigh their personal gain against their professional reputation. Public trust is not built on what leaders are owed, but on how they choose to lead.
One meaningful gesture could be voluntarily donating bonuses to charitable causes or recovery efforts. While symbolic, it signals a more profound commitment to responsibility and social accountability.
Leadership isn’t just about financial performance. It’s about values, judgment, and doing the right thing—especially when it’s hardest.