Companies abandon 'bonus culture'
Published 11/01/2010 | 05:00
Financial organisations are changing how they pay their staff in an effort to move away from the controversial 'bonus culture', a global survey on pay has revealed.
Companies are now shifting the emphasis away from short-term bonus incentive schemes in favour of increased salary, deferred compensation schemes and modified incentive programme design, according to consultancy group Mercer.
Vicki Elliott, worldwide partner of Mercer, said national regulators were trying to make the sector consider risk in their performance measurement and reward schemes so as not to encourage excessive risk-taking.
More than 80pc of all firms surveyed have made, or plan to make, changes to their annual bonus or short-term incentive (STI) plan design.
The majority said they were decreasing the annual cash bonus in the compensation mix, while increasing base salaries and mandatory deferrals.
"Deferring bonuses helps companies to control for short-termism," Ms Elliott said.
Meanwhile, 42pc of respondents have eliminated 'golden parachutes', whereby executives are guaranteed bonus payouts upon departure irrespective of performance -- a practice that generated much debate over 'pay for failure'.