Executive managers’ pay is still determined by simplistic measures of performance that bear little relation to long-term drivers of companies’ value, according to an analysis of pay at FTSE 100 companies over the past decade.
Research from CFA UK and Lancaster Business School, which examined executive remuneration over the 10 years from 2003-2013 at 30 FTSE 100 companies, found there was scant correlation between the key performance indicators that companies highlighted to shareholders and the measures used to incentivise and reward senior staff.
“Much of the discussion [around executive compensation] focuses on the magnitude of bonus payments,” said Natalie WinterFrost, chairwoman of CFA UK, the investment professionals’ society. “The more important question centres around the way that performance is measured and consequently incentivised.”