...........Seriously underpaying senior management increases the temptation to be corrupt. Singapore's decision to pay its top bureaucracy market-linked salaries explicitly acknowledged this problem. But this is only part of the story. The lack of a proper incentive structure is reinforced by slack governance and political-bureaucratic interference. Nominee directors appointed by the government on bank boards are reputed to use their positions to earn rents. Even if not all of them do this, how can a board, whose members succumb to temptations, scrutinise and judge the chairman and other senior managers? The problem is undoubtedly compounded by the substitutability between political-bureaucratic patronage and hard cash....
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