The UK’S bonus system is not fair a survey from the Chartered Institute of Management Accountants (CIMA) has revealed.
It found the UK has the second-least meritocratic bonus system in the world with bonuses causing resentment among two-thirds (35 per cent) of UK firms.
Only the United Arab Emirates faired worse than the UK, with 42 per cent feeling bonuses were awarded unjustifiably.
The CIMA is calling for bonus systems to be designed to encourage long-term success rather than only short-term performance.
“Designing effective incentive systems is hard, yet incentives that may be fair may not look fair – a challenge that touches on the issue of transparency as well as the question of both how and how much to incentivise,” said Wim A Van der Stede, CIMA professor of accounting and financial management.
Recently Neil Woodford, the star stock-picker and founder of Woodford Investment Management, made headlines by ditching bonuses at his firm.
Woodford condemned what he called “frustratingly rife” short-termism in the City, lending his support to a stinging criticism of executive pay levels and a failure of investors to hold management teams to account.