Losses do not appear to be a barrier to the payment of bonuses to the Executive Board
Utrecht, 26 June 2012 - Bonuses for executive board members declined by 9 percent over the past year. The relationship between bonuses and the company's performance does not always appear to be consistent, however. Of the loss-making companies, 80 percent paid an average bonus of €147,000. This is one of the findings of the annual remuneration survey of AEX and AMX companies conducted by Berenschot. In addition, there appears to be a limited relationship between the growth or decline of the net profit.
From the survey conducted by Berenschot into the remuneration of 50 companies listed on the AEX or AMX, it is clear that the short-term bonuses awarded to executive board members declined by 9 percent; from an average of €324,000 in 2010 to €295,000 in 2011. In 2010 the increase amounted to 37 percent since bonuses in 2009 averaged €237,000. Fixed salaries barely increased in 2011. An executive board member in 2011, as well as 2010, on average received approximately €470,000.
Approximately 20 percent of AEX and AMX companies incurred a loss in 2011. Of these ten companies, two did not pay any bonuses to the Executive Board. The average bonus paid by the 80 percent of the companies that nevertheless paid a bonus was €212,000 for the CEO and €147,000 for a member of the executive board. 'These figures show that for many companies the short-term bonus bears no relationship to the company's performance. The bonus primarily appears to be a means of committing top executives to the company,' says Berenschot's researcher Christian Gort.
Forty-eight percent of the companies saw their net profits decline over the past year. Net profits among these companies on average declined by 140 percent. In spite of this, the executive board members of these companies received an average of €220,000 in bonuses. Indeed, the bonuses awarded to this group declined by 16% (whereas the average is 9 percent), but it does not appear to be in proportion to the decline in profits. According to Berenschot's Managing Consultant Rutger Verbeek a bonus should be an incentive to improve performance. However, apparently this is no longer the case: ‘Perhaps executive managers derive more satisfaction from the role they fulfil than from their bonuses. The bonus consequently appears to have become an acquired right.'