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Bonuses – the devils work?, by Averta's Alan Jones

Alan Jones, partner at Averta, a firm which specialises in giving advice to senior executives and professionals, comments on the recent furore in the press about bonus payments to bankers and other senior executives:
It’s the bonus season again, and bankers, traders and railwaymen are in the firing line. Stephen Hester graciously gives up his claim to a (nearly) million pound payment, and the directors of network rail allocate their bonuses to a safety project. All very laudable, and politically, and maybe emotionally, the right thing to do.

But the problem is that if you remove the incentive to succeed, to achieve greater return for shareholders (which include nearly all of us through our pensions), you create a culture of mediocrity, where everyone achieves an average return, and no one is encouraged or motivated to excel.

That is not to say that poor performing executives should be rewarded in a way which bears no relationship to results, or has a short term benefit which evaporates as quickly as the morning fog.

So what to do? The answer is to empower Remuneration Committees with the contractual power to set stretching long term targets, aligning payment to strategic aims of the business. Then the world at large may appreciate the relationship between bonuses and shareholder value.

Even then a huge and growing disparity between blue and white-collar pay rises needs to be addressed. ‘Buy –in’ by society is still important as we need to address wider economic and political concerns and link pay with value to society.
The effective Remuneration Committee has to be the key is to bypass the ‘politics of envy’. By empowering these committees more, can we ensure that key executives are still properly rewarded so our big companies are properly managed to benefit us all?

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For further information please contact:
Suzanne Orsler, SOPR – Tel 07813 131350, or email
Alan Jones – 07970 495733
Averta Employment Lawyers