The Incentive File

Name: The Incentive File
Author: Abdul Zahir Sheikh

Ten Case Files · Five Links · One Self-Audit

What Organisations Reward People For, and the Misconduct That Follows

Before asking who committed misconduct, ask what the organisation rewarded. Ten case files, a five-link trace and a self-audit any board can run on its own pay plans.

Paperback: 978-9914-776-52-2
Hardcover: 978-9914-776-51-5
eBook: 978-9914-776-53-9

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The book in ten slides

About three minutes; each slide stays up long enough to read

The Incentive File. Before asking who committed misconduct, ask what the organisation rewarded. Ten case files, a five-link trace and a self-audit any board can run.

The wrong first question. Most investigations start with the person: who forged the signature, who changed the answer sheet, who booked the income. This book asks a different question first: what did the organisation reward that person for doing?

The risk is named. The proof is missing. The auditing standard on fraud already lists pressure to meet targets among the conditions in which fraud occurs. What has been missing is a way to show, from documents, that a particular incentive caused particular misconduct.

The Reward-to-Conduct Trace. Five links, each with a standard of evidence: the incentive, the foreseeable response, the control gap, the misconduct, and the causal link that joins the first to the fourth.

Every source graded. A: facts admitted or found by a court or regulator. B: an official investigation or settled order. C: peer-reviewed research. D: press and company statements, which can indicate a link but never document it.

The result that would prove it wrong. Set before any case was graded: if fewer than two-thirds of the case files reach Design-caused or Design-enabled at Probable or above, the proposition is downgraded. Without a comparison, no verdict rises above Probable.

Ten case files. Lloyds TSB and Bank of Scotland, Wells Fargo, Tesco, Bristol-Myers Squibb, US Veterans Affairs, Atlanta Public Schools, police recorded crime, Fannie Mae, Kraft Heinz and the English NHS under star ratings.

Eight of ten clear the bar. Eight case files reach Design-caused or Design-enabled at Probable or above: 80 per cent against a bar of two-thirds. Only Atlanta reaches Established. The margin is one case, and every grading is published so readers can re-grade it.

Twelve red flags, five steps. Twelve features can be read in a pay plan before it launches, each matched to a control. The Incentive Self-Audit turns them into five steps an internal audit team can run, and a board can read on one page.

A second party, never an excuse. A finding that a design caused misconduct never clears the people who committed it. It names a second party: the organisation, whose share cannot be passed down the line.

About the book

When thousands of people commit the same misconduct, why does every investigation still begin with one of them?

Most investigations start with the person who did it: who forged the signature, who changed the answer sheet, who booked the income that was not there. Those questions matter, and this book asks them too. It asks a different question first: what did the organisation reward that person for doing?

The auditing standard on fraud already lists pressure to meet targets among the conditions in which fraud occurs. What has been missing is a method for answering the question with evidence — for showing, from documents, whether a particular incentive caused particular misconduct, and how sure anyone can be.

The test is stated before any case is examined. So is the result that would prove the book wrong.

The Reward-to-Conduct Trace follows five links from the incentive to the conduct, with a standard of evidence for each. Every source is graded. Then the Trace is applied to ten case files: Lloyds TSB and Bank of Scotland, Wells Fargo, Tesco, Bristol-Myers Squibb, the US Department of Veterans Affairs, Atlanta Public Schools, police recorded crime in England and Wales, Fannie Mae, Kraft Heinz and the English NHS under star ratings.

The book set its own bar in advance: two-thirds of the case files. Eight of ten clear it. The book shows exactly how little room that leaves — a margin of one case — and publishes every grading so that readers can re-grade the files for themselves.

A finding that a design caused misconduct never clears the people who committed it. It names a second party.

The final part turns the evidence into practice: twelve red flags that can be read in a pay plan before it launches, a control matched to each, and the Incentive Self-Audit, five steps a board can run on its own records.

Written by Abdul Zahir Sheikh, a Certified Fraud Examiner and Senior Partner at BDO East Africa with four decades of investigative experience across fourteen countries, it is written for the people who approve incentive plans and the people who check them: directors, chairs of audit and remuneration committees, finance directors, heads of reward, internal auditors, fraud examiners and regulators.

Read the incentive file first. Read last, it explains why the dismissals changed so little.