5) Use negative reinforcement when rules are broken. Bad dogs get their toys taken away from them. CEOs and other corporate leaders should lose bonuses, other pay and even their jobs when their company engages in fraud or other serious wrongdoing. Clawbacks, such as those the Royal Bank of Scotland agreed to pay in response to the Libor scandal, are on the right track. The bank said it is deducting £300 million from employee incentive pay – including clawbacks of bonuses from traders and supervisors – primarily from the bank's markets division, which was most heavily involved in the manipulation of Libor. RBS took the claw-backs, the bank said in its announcement last week, "to account for the reputational damage of these events and the risk of additional outstanding legal and regulatory action."