In the Guardian, Devendra Kodwan explores the failure of the bankrupt busines bonus culture. The article sort of sputters to an unsatisfactory end, but it is still worth the two minutes it takes to read, for there is no question that bonus “pay for performance” schemes produce pay, but not performance.
Just look around.
First, the idea of using performance-based incentives that included bonuses, in particular share options, has clearly backfired. Recent research from US academics suggests that the link between executive incentives and firm performance is tenuous in a best-case scenario, and indeed negative in some cases. There is also disturbing evidence that when firms pay a very high level (90%) of CEO compensation in stock options, it increases the chances of questionable financial reporting in the following years.