PwC and LSE Study Says Current Incentive Plans Don’t Motivate Executives, Big4.com Reports

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Incentives too complex according to research

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Big4.com, the premier social networking forum for professionals and alumni of Accenture, Andersen, BearingPoint, Capgemini, Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers PwC, reports on new PwC research in conjunction with the London School of Economics and Political Science that shows many features of current pay packages mean that the value executives place on them is materially lower than the cost to companies of providing them. Big4.com notes that the research highlights the fact that incentives have become so complex and volatile that they no longer motivate the executives they are aimed at.

The “Psychology of Incentives” study of over 1,100 participants reveals executives are risk-averse, don’t like complexity and discount deferred pay. According to statistics reported on by Big4.com, deferred bonuses hold little incentive, with the majority of executives valuing a £100 of bonus in a typical deferral plan at only half its value (£50).

The research reveals that two thirds more respondents (51% versus 27%) favoured a cash plan based on profit targets that they understand over a more ambiguous share plan based on their share price relative to other companies. The more complicated the reward, the more likely participants were to choose the smaller but more certain reward.

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Kristy Short
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(734) 481-0186
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