Target bonus payments on the march again

Even though boni and stock options are still the basis of the salaries of top managers and board members, about two thirds of all companies already cap them. However, the reason is not public criticism of exorbitant bonus packages, but the rivival of bonus payments which are based on specific medium or long term target setting and which are to offer a special incentive to top managers. This is the finding of the »Trends bei Mid und Long Term Incentive Plänen 2006« study prepared by PricewaterhouseCoopers (PwC).

It is true that the development of the share price is still the most important criterion for the assessment of the manager performance in all the incentive plans studied, but alternative financial ratios are becoming increasingly important. One in four companies prefer long-term incentives which link bonus payments to the attainment of certain business objectives to stock options.

The number of bonus programmes which are based on stock options slightly decreased from 48% in 2005 to currently 46%. Says Michael Bursee, salary expert with PwC: »What is striking is the fact that financial ratios are not only an additional success criterion besides the development of the share prices any more, but in one fifth of all incentive programmes they are the only performance indicator«.

Bonus payments as well as medium and long term incentives on average make up two thirds of the salary of board members. 43 percent of the salary of upper management is variable and 37 percent of the salary of middle management. GERMAN