A kickback is a payment of money, favors, or some other valuable to another individual to perform a certain desired action or to make an important decision in the kickbacker's favor. The desired action is often a referral that results in a transaction that benefits the person who paid the kickback. A kickback can be either legal or illegal, depending on the circumstances of the action. A kickback is generally done in secret. In investing, a common kickback is a broker's reduced commission charged to someone who invests frequently through the broker. Another example is referral payments for finding clients. Kickbacks occur not only in business, but also in government sectors. The US government has laws that prohibit kickback behavior. Example:
The CEO of a listed company, ABC invested company's fund, $1 billion in a company called XYZ with full knowledge that it would go bankrupt soon. Prior to the investment decision, he had liaised a 50/50 split with the owner of company XYZ that each would get $500 million once he got the money. After a while, company XYZ really went bankrupt. It didn't affect the CEO personally as the $1 billion in losses were attributable to the listed company ABC. So what's rightfully company ABC’s money has now become the CEO's personal money, and it’s all legal and above board.