Friday 18 March 2016

Should You Stop or Continue To Pay Executives For Performance?

Paying executives performance bonuses on top of their salaries and offering additional incentives for performance in general has been a common topic lately with some of my clients.

To help my clients to make the best decisions for them I've used the following Harvard Business Review articles as conversation starters:

Stop Paying Executives for Performance by Dan Cable and Freek Vermeulen, and

Performance-Based Pay for Executives Still Works by Alex Edmans.

What do you believe? Should You Stop or Continue To Pay Executives For Performance?

What do you actually do?

My conversations with clients led to three conclusions. Firstly, paying CEO's 300 times or more, than what the lowest paid employee receives is immoral, and secondly so are the amounts many people receive.

There was lot's of chuckling when this chart of what Australia's top 10 CEO's are paid was explored. Is anyone delivering such value that they're worth 30 million a year? was a typical question.

This led to the third conclusion of conversations with my clients, people should be paid according to value delivered.

When determining how you pay all of your employees do you ask

What is the value being delivered and how much is that value actually worth to the business?

Be remarkable.

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