Executives prefer variable bonus

Posted by Mereo
at Friday July 20th, 2012.

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Among Brazilians, 35% of executives expressed interest in exchanging a fixed salaryfor variable bonus

planningestratégicoExecutivos prefer to have lower profit in safer remunerationexchange. It reveals that the study “Making executive pay work: the psychology ofincentives” conducted by PwC in partnership with the LSE (London School ofEconomics and Political Science), which surveyed more than 1,106 executives from 43 countries, and 56 of Brazil.

Research also shows that professionals in Latin America are the most daring acceptpackages. Among Brazilians, 35% of executives expressed interest in exchanging a fixed salary for variable bonus, if it is significant. But this provision is restricted tosituations in which the sum is quite high and is offered as an extra income and not assalary.

The British and the Australians, on the other hand, are the most conservative, with only 15% of them would accept this kind of return.

According to the partner at PwC, John Lins, the result leaves doubt about the effectiveness of long-term incentives such as deferred bonuses or equity-based plans.Although defended by many shareholders, regulatory bodies and corporate governance as a way to influence the behavior of executives, some incentives are not as well regarded by those who receive them.

Professionals tend to use a lot more than the market discount rate in calculating thelong-term incentive of this value. “It’s hard to see how a payment which has low valuein the perception of the executives may have a significant influence on the stance of professionals. Therefore, it is expected that the pressure for effective increases in salaries is growing, “says Lins.

About two-thirds of executives surveyed said they value a share of profits fromcompanhas to which they belong, but less than half considered effective way of howthe incentive is offered. The countries that have the best rating of the interest subsidywere precisely those where the bonus has a simpler format. This means that the long-term benefits have become so complex and volatile no longer motivated practitioners.

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Most professionals also accept earn less in absolute terms, the amount was greater than that received by their peers. Only a quarter would accept a higher salary in absolute terms, but less than other professionals in the same position.

Respondents also emphasized that would be willing to give up, on average, up to 28%of their salaries to have the dream job. In this regard, the results were high worldwide;the lower court accepted was proposed by Indian executives, with 24%, and mostcame from the US, with 35%.

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