A person acting on a moral incentive can expect a sense of self-esteem, and approval or even admiration from his community; a person acting against a moral incentive can expect a sense of guilt, and condemnation or even ostracism from the community. An incentive is a contingent motivator. Traditional incentives are extrinsic motivators which reward actions to yield a desired outcome. The effectiveness of traditional incentives has changed as the needs of Western society have evolved. While the traditional incentive model is effective when there is a defined procedure and goal for a task, Western society started to require a higher volume of critical thinkers, so the traditional model became less effective. Institutions are now following a trend in implementing strategies that rely on intrinsic motivations rather than the extrinsic motivations that the traditional incentives foster.
The reward system is a group of neural structures responsible for incentive salience, associative learning, and positively-valenced emotions, particularly ones which involve pleasure as a core component.This phenomenon is called intracranial self-stimulation or brain stimulation reward. Typically, rats will press a lever hundreds or thousands of times per hour to obtain this brain stimulation, stopping only when they are exhausted. While trying to teach rats how to solve problems and run mazes, stimulation of certain regions of the brain where the stimulation was found seemed to give pleasure to the animals. They tried the same thing with humans and the results were similar. The explanation to why animals engage in a behavior that has no value to the survival of either themselves or their species is that the brain stimulation is activating the system underlying reward.
Financial markets are unable to accurately gauge the meaning of repurchase announcements, because companies will often announce repurchases and then fail to complete them. Repurchase completion rates increased after companies were required to retroactively disclose their repurchase activity, the result of an effort to reduce the perceived or potential exploitation of public investors. Normally, investors have more of an adverse reaction to dividend cuts than postponing or even abandoning the share buyback program. So, rather than pay out larger dividends during periods of excess profitability then having to reduce them during leaner times, companies prefer to pay out a conservative portion of their earnings, perhaps half, with the aim of maintaining an acceptable level of dividend cover.