Executive pay: financial incentives damage long-term profits
The more focus companies put on financial incentives for CEOs’ bonuses, the worse the firm’s commercial performance, according to a study of Europe’s top 600 firms.
Research from Vlerick Business School in Ghent, Belgium, found that high pay and incentives such as bonuses and share-related incentives was an effective way to boost firm’s profitability, but only in the short-term.
Executive pay
The study was conducted by Xavier Baeten, professor in reward and sustainability at Vlerick and director of the school’s Executive Remuneration Research Centre, alongside researcher, Marthe Van Hove.
They examined pay levels, habits and incentives of CEOs and CFOs of the STOXX 600 – a stock index of the 600 largest firms across Europe, including 155 UK firms.