Almost two thirds (62%) of UK finance professional respondents feel that unjustified bonuses cause resentment among colleagues, according to research by the Chartered Institute of Management Accountants (CIMA).
The research, which surveyed 6,500 finance professionals globally, also found that 35% of UK respondents feel that bonuses for top earners are undeserved.
The research also found:
- 48% of respondents that work for an organisation that operates a bonus scheme believe that bonuses reward short-term performance at the expense of long-term goals.
- 97% of respondents based in the north east of England feel that unjustified bonuses cause resentment among colleagues.
- 39% of respondents aged between 50 and 54 feel that bonuses are unjustified.
- 78% of respondents based in London work for an organisation that operates a bonus scheme, compared to 47% in Northern Ireland, and 46% in the north east.
- 29% of UK respondents that receive bonuses say that their bonus has the potential to reach 20% of their annual salary.
- 19% of female respondents feel that their bonus might reach a fifth of their annual salary, compared to 34% of male respondents.
Tony Manwaring, executive vice-president, external affairs at CIMA, said: “Boards need to think carefully about their bonus structure and this applies to all levels within the business. Current schemes often only focus on ‘hard indicators’ such as short-term revenue, but they should also seek to reward evidence the employee is helping the organisation plan and build for the long term. As a bare minimum, they need to ensure incentives are rooted in a firm understanding of the business model and are aligned to long-term business success.”
Professor Wim A Van der Stede, professor of accounting and financial management at CIMA, added: “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.”