Fewer companies offer financial-related bonuses to senior executives

Bonuses that are purely financial for UK company executives are on the wane, with companies moving towards a combination of financial, non-financial and individual measures instead, according to research.

In its 2007 Annual and Long-term Incentives report, PricewaterhouseCoopers found an 18% increase in reward packages offered on a combination of financial, non-financial and individual measures to 31% in 2006-07 from the previous year.

The survey of 500 businesses also found that the average maximum bonus opportunities available for chief executives in FTSE 100 companies had risen to 123% of their salary from 103% last year. For FTSE 250 firms, they have increased by 5% from the previous year to 100%.

Duncan Brown, director in the HR practice at PricewaterhouseCoopers LLP, said: “We are seeing a continuing shift towards variable pay in UK plcs and a growing emphasis on long-term performance when determining executive pay.

“Additionally, the broader corporate stakeholder and corporate responsibility agenda has stimulated growth in the use of non-financial measures in bonus plans alongside those more traditional measures focused on financial and shareholder return.

“Some of the most popular new measures are operational performance and customer-related ones, which mean that if customer service levels fall, then so could executive bonuses,” he added.

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