Sunday 21 January 2018

UK firms keep controversial bonuses

Martin Sorrell, chief executive officer of WPP
Martin Sorrell, chief executive officer of WPP

Simon Jessop

Pressure on British companies to ditch a common performance-related bonus scheme blamed for generating excessive executive pay has not stopped many firms from planning to stick with such schemes for another three years, a Reuters analysis shows.

In theory, so-called long-term incentive plans (LTIPs) aim to legitimately encourage management success in boosting shareholder returns. Yet a series of corporate scandals and lucrative payouts has made them a target for criticism.

Politicians in Britain last week recommended LTIPs be phased out from 2018, while Norway's sovereign wealth fund, the world's biggest, wants them scrapped. The British government has also launched a review of corporate governance including incentive plans.

Exemplifying LTIP generosity, advertising company WPP paid chief executive Martin Sorrell more than £70m (€82.5m) for 2015, more than £60m of which came through an incentive scheme - a payout that a third of WPP shareholders declined to support.

However, most top companies have retained LTIPs as part of executive pay when seeking investor approval for a three-yearly remuneration policy at shareholder meetings. Analysis by Reuters of company annual reports and data from governance advisory firm Manifest shows 59 members of the FTSE 100 blue-chip stock index recently updated their remuneration policy or plan to soon, of which 56 currently use or plan to continue using LTIPs.

Companies use a range of data to calculate the payouts, with many referencing the firm's share price. (Reuters)

Irish Independent

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