Once more the issue of rewards\u00a0and links to long term success of the company have been raised. \u00a0The Financial Reporting Council will be advocating stronger links and also clauses to enable bonuses to be clawed back [1]. \u00a0However, focusing on the payment formula alone will not produce a sound scheme. \u00a0Like an iceberg, the danger is not the visible part \u2013 the formula \u2013 but the mass below the water line i.e.\u00a0how the incentive will be achieved.<\/p>\n
A bonus scheme legitimises certain behaviours as individuals seek to achieve the bonus and\/or shares. \u00a0It is no good despairing that the wrong results and behaviours have arisen as incentives change behaviour in many, but not all, instances. The\u00a0first key step is for the Remuneration Committee or the Board\u00a0to invest time in being clear\u00a0about what short and longer term outcomes are required and<\/strong>\u00a0how those should be achieved. \u00a0By that I\u00a0mean what type of behaviours should be encouraged or discouraged. \u00a0 Then one can begin to examine the mechanics\u00a0of the scheme but always with an eye as what type of behaviours are being legitimised.<\/p>\n For example, will the scheme foster reasonable risk taking or exploring innovative ways of obtaining the results? \u00a0 If the ways in which the results are obtained is important to the company then the scheme should build \u2018the how\u2019 into the scheme. \u00a0 Individual leaders and participants are then aware of where the edges of the path are i.e. they\u00a0can walk anywhere on that path but may not step beyond the edges.<\/p>\n The pressure is not to eliminate such bonuses but, to quote Vince Cable, \u201cPolicies that reward executives out of proportion to the value they create are a clear dereliction of the duty.\u201d\u00a0[2]. \u00a0 Hence, the importance of being clear from the outset what the incentive scheme should reward and the ways in which the scheme should reinforce the desired ends and means.\u00a0<\/span><\/p>\n Previous articles on this blog covered the issues and pointers in more depth. \u00a0Read the following articles:<\/p>\n Board and Executive Pay \u2013 putting a sound policy in place (link reference to be added) Sources: \u00a0<\/strong><\/em><\/p>\n \u00a9\u00a02014\u00a0 HR Management Dimension Ltd.<\/strong><\/span> <\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" Once more the issue of rewards\u00a0and links to long term success of the company have been raised. \u00a0The Financial Reporting Council will be advocating stronger links and also clauses to enable bonuses to be clawed back [1]. \u00a0However, focusing on the payment formula alone will not produce a sound scheme. \u00a0Like an iceberg, the danger […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"wds_primary_category":0,"footnotes":""},"categories":[23,56,22,28,12],"tags":[57,58,59],"class_list":["post-745","post","type-post","status-publish","format-standard","hentry","category-pay-structures","category-performance-management","category-reward-recognition","category-senior-management-pay","category-strategy","tag-incentive-schemes","tag-management-bonuses","tag-pay-structure-objectives"],"jetpack_featured_media_url":"","post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/posts\/745","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/comments?post=745"}],"version-history":[{"count":0,"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/posts\/745\/revisions"}],"wp:attachment":[{"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/media?parent=745"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/categories?post=745"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hr-management-dimensions.co.uk\/HRMDmn\/wp-json\/wp\/v2\/tags?post=745"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n<\/a>Board and Senior Management Pay \u2013 Equitable Approaches<\/a><\/p>\n
\n[1] Daily Telegraph \u2013 Business \u2013 report by Harry Wilson 24\/04\/14
\n[2] Vince Cable \u2013 reported by Harry Wilson,\u00a0Banking Editor\u00a0Daily Telegraph\u00a022\/04\/14<\/span><\/span><\/p>\n
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\n<\/a>Web site:\u00a0 HR Management Dimensions<\/a><\/p>\n