While a quarter of S&P 500 companies base CEO bonuses partly on qualitative factors, research shows that’s not a good idea.
Should bonuses paid to CEOs and CFOs be linked to qualitative performance criteria such as displaying strong leadership, mentoring other executives, and having a strategic vision?
The answer is no, according to a recent study I conducted with my colleague Nancy Feng at Suffolk University. Our analysis of data for S&P 500 companies reveals that employee productivity, asset productivity, capital expenditures, and future stock returns are lower when the CEO’s bonus payment depends in part on qualitative criteria.
Read more … Source Cfo