Smithers: CEOs' perverse incentives damage economies

Fund Management Summit

Incentive structures intended to motivate senior management are out of sync with the interests of companies and a danger to the whole economy, according to Andrew Smithers.

Speaking at the Fund Management Summit, the prominent financial commentator and founder of Smithers & Co said “perverse incentives” given to CEOs of large listed companies leave them concentrating on short-term bonuses instead of long-term company plans. “Modern management remuneration systems are abysmal for the UK and US economies,” the expert said. “Bonuses now make up 83% of an average CEO’s total pay, which has led to a drop in investment, a sharp rise in profit margins, and increasingly volatile published profit figures.” The risks faced by companies are not aligned with the ...