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Former CBI chief attacks bonus pay structures

Richard Lambert says top executives' pay should be simplified

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High levels of performance related pay for top executives creates "wrong incentives", the former director-general of the CBI said on Friday.

Richard Lambert (pictured) told BBC Radio 4's Today programme that the complicated nature of executive bonus schemes hinders business.

If you look back over 10-15 years, you will see the basic pay for top executives has hardly changed at all and all the increases have come from these highly complicated performance packages," he said.

"The problem with that is that first of all it's a ratchet, in that it almost never goes down, and I think it gives the wrong incentives."

The chief executives of the Royal Bank of Scotland, Stephen Hester, and Network Rail – Sir David Higgins – have both turned down bonuses in the past two weeks, following on from Lloyds Bank chief executive António Horta-Osório's decision to turn down a £2.4 million bonus in January.

The government is attempting to tackle the issue of top executives taking home high levels of bonuses for poor performance. Business secretary Vince Cable last month published a consultation document aimed at challenging what he called "rewards for failure".

Lambert said he did not think that these complicated structures for performance-related pay can be removed overnight. However, he added: "I do think there is a reappraisal going on and I think there is pressure for simplification and that will be a good thing."


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