Ruth Mitchell

Member Article

UK companies put their money where their mouths are

The UK’s biggest companies are increasingly looking beyond purely financial measures to set pay for their top executives and leaders. There has been a sharp increase in the use of non-financial measures such as customer satisfaction, levels of health and safety and employee engagement, market share, environmental measures and corporate and social responsibility (CSR), says PricewaterhouseCoopers LLP in its annual report on UK pay trends.

PWC’s ‘Executive Compensation: Review of the Year 2007’ shows how, even at board level, fewer than 20% of companies now rely solely on measures of financial performance in their annual bonus schemes. The use of non-financial measures has risen from 35% of bonus schemes last year, to 57% this year.

The company warns, however, that managers may find other ways of their targets than the intended means. PWC cite the example of NHS waiting lists, where the Health Service discovered that it is possible to achieve a specific numerical target in a way that was not originally envisaged.

Ian Lithgow, director, human resource services, PricewaterhouseCoopers LLP, Newcastle said: “Companies should be careful to choose metrics which are genuinely used in the management of the business. There is now a great opportunity for companies to consider how such metrics support the long-term sustainability of the business in the broadest sense, both in terms of relevant operating measures and corporate and social responsibility goals.

“If they get it right, incorporating such non-financial measures into reward schemes is a powerful way of directing strategy and bringing about change.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .

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