1
DECLARATION OF ORIGINALITY
AND WORD COUNT

I hereby declare that the graduation project is based on my original work except for
quotations and citations which have been duly acknowledged. I also declare that it has
not been previously or concurrently submitted for any other course/degree at Help
University College or other institutions. The word count is 14,056 words.
______________________
NGO THI KIEU VUI
October, 2011 2
ACKNOWLEDGEMENT

First at all, I would like to express my sincere thanks to my project supervisor, Dr. Le
Van Lien, International School, Vietnam National University Hanoi for guidance and
encouragement in carrying out this project work.
Great deals appreciation goes to Ms. Sumathi, Help University College, who initiated

to encourage them is still controversial among the researchers. In the accounting field,
managers and accountants play important roles in preparing a complete financial
statement. How to encourage them to make the true and fair financial statements is very
important to various parties in a company. The purpose of this research is to find out the
real effect of monetary incentive in the workplace, especially its effectiveness on
motivating managers and accountants in providing the true and fair financial statement
and performing other tasks in the company. 4
TABLE OF CONTENTS

DECLARATION OF ORIGINALITY AND WORD COUNT 1
ACKNOWLEDGEMENT 2
ABSTRACT 3
TABLE OF CONTENTS 4
LIST OF FIGURES 7
LIST OF ABBREVIATIONS 8
1. INTRODUCTION 9
1.1. Background of study 9
1.1.1 Monetary incentive in the world 9
1.1.2. Monetary incentive in Vietnam 10
1.1.3. Accounting scandal involved in monetary incentive 11
1.2. Scope of research 12
1.3. Problem statements 13
1.4. Hypotheses 14
1.5. Organization of research 15
2. LITERATURE REVIEW 17
2.1. Issues related to monetary incentives 17
2.1.1. Motivation 17


6
3.6.4. Sample techniques 44
3.7. Limitations 44
4. FINDINGS AND ANALYSIS 46
4.1. Test for Hypotheses 48
4.1.1 Hypothesis 1 48
4.1.2. Hypothesis 2 50
4.1.3. Hypothesis 3 51
4.2. Overall discussion from questionaire survey 53
4.2.1 Purpose and motivation at work 53
4.2.2 Imbalance between monetary incentive and input 56
4.2.3 Opportunism in work 59
4.3. Overall discussion from managers and accountants interviews 61
5. CONCLUSION 65
REFERENCES 68
APPENDIX A: QUESTIONNAIRE 78
APPENDIX B: STATISTICAL TEST 81 7
LIST OF FIGURES

Table 4.1 Classification of the Respondents from Different Sector 46
Table 4.2 Classification of the Respondents from Different Gender 46
Table 4.3 Classification of the Respondents of Different Age Group 47
Table 4.4 Respondents’ purpose and motivation at work 49
Table 4.5 Imbalance between monetary incentive and input 51
Table 4.6 Opportunism in work 52
Figure 4.1 Classification of the Respondents from the Length of Employment 47

Monetary incentives have been known as a motivation tool and have been used in many
companies in the world many years ago. The most popular forms of monetary incentive
are bonus and share options. Since 1929, Bethlehem Steel was the second-largest steel
manufacturer in the US. Eugene G. Grace, President of Bethlehem Steel, was rewarded a
$1.6 million bonus. He became the first million-dollar man at a public company
(Business Week, 1999). In the history, the success of many large companies usually
records a large amount of monetary incentive to be paid for the board of management.
This result has been shown in many surveys conducted by Business Week Magazines,
Financial Director (FD) Magazines.
In 1997 Business Week’s annual executive pay survey, Coca-Cola provided Roberto
Goizueta, CEO of Coca-Cola, a total of $111.8 million which consisting of annual
salary, bonuses, and long-term compensation. This was also one of the most well-paid
monetary incentive packages in the history of public companies. However, Coke’
shareholders were very happy with such incentive package. It could be said that the
whole life of Goizueta devoted to Coca-cola during his 16 years reign, he has made great
contributions to the company. Coke’s stock increased at an amazing 3,800 per cent
(Roger Martin). In the same year, top executives of nearly half of the 200 largest
companies were awarded a large number of options that worth at least $10 million. In 10
addition, according to 2005 FD salary survey, Kevin Hayes, FD of Man Group_ a world
leading alternative investment management business, ranked no. 1 in FTSE-100 FD pay
league with a total pay of £2,359,000 including £310,000 salary, £2,000,000 bonus and
£49,000 others (Financial Director, 2005). Hayes’ bonus was even much higher than his
basic salary. In these cases, the success of these companies was based on the fact that
monetary incentive has played an important role in encouraging the board of
management on performance.

1.1.2. Monetary incentive in Vietnam

mention a typical scandal involved in monetary incentives in the accounting history.
That is the case of Nortel Networks Corporation. Since 1895, Nortel Networks
Corporation was a Canadian multinational telecommunications equipment manufacturer.
Then, it has rapidly grown into a global leader in delivering communications capability
(Corporate website). However, it was involved in the worst telecom meltdown in the
history when it announced a loss of $2.2 billion for the last quarter of 2005. On 2 July
2007, a Wall Street Journal reported that Nortel manipulated its books by misusing
accrued liabilities to boost profit earnings (Wojtek Dabrowski, 2008). Many of Nortel’s
executives have been charged by U.S regulators for engaging in accounting fraud. They 12
manipulated Nortel’s books to meet Wall Street’s expectations, and pay themselves high
level of bonuses. “Nortel's earnings management fraud could not have happened
without their efforts. These defendants all received significant compensation while they
were falsifying Nortel's financial results”_ Christopher Conte said_ an Associate
Director of the Commission’s Division of Enforcement (U.S Securities and Exchange
Commission, 2007). It was believed that the cause of this scandal was Nortel’s board
put a too powerful monetary incentive package for its leaders into place. If Nortel
reached break even point for the first quarter, the management team would be rewarded
US$13.6 million and US$30 million for three consequence quarters. This drove senior
management to intentionally under-report income in 2002 in order to ensure to break
even in 2003. Due to the intention of management, 2003 was a break-even year and
Nortel’ CEO and CFO were rewarded a huge amount of bonuses in cash and stock.
Frank Dunn, one-time CEO, sacked $2.15 million. CFO Douglas Beatty got $831,000.
In 2003, Nortel had to pay US$10 million for managers’ bonuses. It is clear that
monetary incentive had motivated management in manipulating accounting information.
Therefore, Nortel had not used monetary instruments effectively in encouraging
managers to product the true and fair accounting information.

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 Should monetary incentives always be used to motivate employees on effort
and task performance in today’s working environment in Vietnam?

1.4. Hypotheses
There are three hypotheses to be established and tested by chi-square test. H1 represents
the alternatives of hypothesis and H0 represents the null hypothesis. The hypothesis will
be tested with the significant level α = 0.05.
Hypothesis 1
H1: The purpose of work of managers and accountants is mainly due to money and they
are motivated on performance by monetary incentive.
H0: The purpose of work of managers and accountants is not mainly due to money and
they are not motivated on performance by monetary incentive.
Hypothesis 2
H1: If the monetary incentive is imbalance with managers’ and accountants’ input, they
usually do not perform their tasks well.
H0: If the monetary incentive is imbalance with managers’ and accountants’ input, they
still perform their tasks well.
Hypothesis 3
H1: Regardless of how much monetary incentive, when there is an opportunity,
managers and accountants will act opportunistically. 15
H0: Regardless of how much monetary incentive, when there is an opportunity,
managers and accountants will not act opportunistically.

1.5. Organization research

2.1. Issues related to monetary incentive
2.1.1. Motivation
Thousands of years ago, when the concept of “motivation” was still unknown, people
realized the importance of influencing workers to accomplish task performances. Many
years later, this was the premise of the appearance of the term “motivation” and then it
has rapidly become one of the most common concepts in everyday language.
Nowadays, it is a concerning issue of almost all companies and a difficult subject in the
workplace. Although it is very difficult to define this concept rigorously, there are still
various definitions on this concept.
Motivation can be referred to as “the act of stimulating someone or oneself to get a
desired course of action to push the right button to get a desired reaction, a compliment,
dollar raise, a smile, a promise of a rise, a new typewriter, a preferred location or a new
desk” (Michael L. Jucius); “the psychological process that gives behavior purpose and
direction” (Kneitner, 1995); “give reason incentive, enthusiasm, or interest that causes
a specific action or certain behavior” (Wenday Pan, 2008); or “a set of forces that
directs an individual to the behavior that results in better job performance” (Ashim
Gupta, 2011). Two main kinds of motivation are intrinsic and extrinsic. Intrinsic
motivation (non-financial incentive) comes from within the individual, not from any
outside pressure, such as public recognition or feelings of achievement. It is driven by
enjoyment and pleasures of completing a task. Adversely, extrinsic motivation (financial 18
incentive) occurs when external factors attract employees to work, for example,
monetary incentives or punishment.
Motivation brings advantages to both the company and employees. If an employee is
highly motivated, motivation will be converted to “probably work harder, produce a
higher quality of work and be less liable to take time off”. In addition, it helps to “avoid
clashes and non-cooperation and brings harmony, unity and co-operative outlook
among employees” (Gauray Akrani, 2010). As a result, the company can increase the

they usually offer incentive systems as an important part of the companies’ motivation.
These systems are usually used as the way to reward staff. In many cases, incentive
systems are also used for the purpose of correcting and preventing the employees’
mistakes in term of penalties, fines and other punishments. However, the systems can
encourage or discourage their employees up to their ability in designing these systems.
A good incentive system can encourage employees to work harder, produce more
efficiency and foster loyalty to the company.
Monetary incentive is a type of incentive and used as a motivation tool. The companies
offer monetary incentive to all categories of workers in terms of rewarding money in
exchange for their desired performance. In general, monetary incentive is paid in
addition to basic wages or salary. It may be further divided into two categories:
individual monetary incentive and group monetary incentive. Individual monetary 20
incentive means that individuals are paid “based solely on the performance of the
individual employee” (Judith, 2001). F.W. Taylor suggested a good example of the
individual monetary incentive which is different incentive wage plans. Different
employees have different ability in production. Therefore, they are paid different
incentive wages as per their production efficiency. As for managers and accountants,
they hold important positions in a company. Their responsibility is often higher than
other employees. They also have to work on higher effort than others. This also means
the company should pay them different monetary incentives than others. Moreover, if
managers want to be paid more monetary incentive, they need to work more efficiently
and productively than others. With group monetary incentives, the monetary incentive is
given to a group of employees or to all employees in the company. Some typical
examples of the group monetary incentives are bonus payment, profit sharing, pension
funds. Rewarding managers as a group will motivate them to cooperate with other
employees to accomplish the company’s goals. Furthermore, this also motivates
managers to act in the best interest of the company. For the company as a whole, group

company’s goal. Numerous studies have demonstrated that monetary incentive is a
useful technique to increase motivation and thus performance (Guzzo, Jette, & Katzell,
1985; Locke, Feren, McCaleb, Shaw & Denny, 1980). Each person has different
motivation for working and especially, no one works for free. Some people work for
love, fun, personal fulfillment, or fill up their free time with activity. Whatever any 22
personal reason that may be, almost everyone work for money. “The invisible hand” of
Adam Smith described the idea that people act on behalf of their own self-interests to
promote the public good (Peter Mork, 2004). That also means they work to serve their
self interest and are presumably motivated by money. Basic needs motivate them to
works for basic salary and monetary incentive might motivate them on better effort and
task performance. Smith showed that highly rewarding economic activities will affect
directly on one’s own self-interest and also maximize the economic well-being of
society. Smith believed that monetary incentive will bring several benefits to the
company when it motivates employees on higher level of performance. Thus, monetary
incentive is a good motivating tool in business.

2.1.4. Arguments against monetary incentives
In purpose, monetary incentives have been used to reward employees for desired
behavior and good performance. However, monetary incentives do not always achieve
the positive effect in a business. In some cases, they create some problems. There are
many arguments against the use of monetary incentive at work. In the article “Why
Incentive Plans Cannot Work” in 1993, Alfie Kohn argued that “rewards succeed at
securing one thing only: temporary compliance”. He indicated that at least two dozen
studies showed a complete opposite result with the purpose of using monetary incentive.
Monetary incentives may encourage employees to perform in a particular way to achieve
monetary reward but do not encourage them to do the right things. As a consequence of
this issue, monetary incentives may drive employees to be involved in unethical actions.

Adam’s Equity Theory is considered as one type of the justice theories. The equity is
calculated based on the ratio of outputs over inputs. Adams suggests that in order to
achieve equity, work effort must be equal to work reward, or the equity ratio of one’s is
equal to others as the following equation:
)(
)(
)(
)(
OtherOutcomes
OtherInputs
IndividualOutcomes
IndividualInputs


Inputs are everything or all investments that a person puts into work. Typical examples
of inputs are effort, ability, hard work, flexibility, loyalty and so on. Outputs are what a
person takes out in return and equal reward minus cost. They can be financial rewards
such as monetary incentive, and non-financial rewards such as recognition, growth. In
order to receive an outcome such as bonuses and share options, the employee has to first
put investments into work such as time and effort. Adam believes that if outcomes are
less than inputs, workers will seek equilibrium in the form of reducing effort, requiring a
pay rise. In the case of over-rewards, employees may fell compelled to work more
effectively and productively. In such two cases, employees will become de-motivated.
Only if workers are rewarded equally to their contributions, they will be motivated the
most. Moreover, workers usually tend to make comparisons. They compare their
outcomes over inputs with others. If they feel that their receipts are equal to what others
receives for same inputs, they believe that the treatment is equitable and adversely, they
will transform to higher effort on task performance. Therefore, the study of Adam
showed that the equity or the balance between input and output is very necessary to