Top executives can't understand their complex pay packages

Executives are so confused by the complicated pay packages lavished on them by remuneration committees they are no longer motivated by them, a study has claimed.

The report, by PricewaterhouseCoopers and the London School of Economics, torpedoes one of the main arguments used in defence of some of the most controversial pay packages which company chairmen have claimed are "vital" to motivate executives.

Researchers who interviewed 1,106 executives from 43 countries were told that paying long-term bonuses in shares meant pay was too volatile and that executives would prefer lower rewards that offered more certainty.

Because of this it argues that the value executives place on their pay plans is "materially lower than the cost to companies of providing them".

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