With so many stories of company executives taking home extortionate (to the average worker) bonus payments hitting the headlines recently, it was refreshing to hear of Next chief executive Simon Wolfson’s approach to his bonus payout.
This month, about 19,400 of the retailer’s staff who have worked for the organisation for at least three years will receive a one-off bonus worth an average of 1.5% of salary after Wolfson announced his intention to share his £4 million payout from a share-matching plan with employees.
This is not the first time Wolfson has made such a gesture. Last year, he shared a £2.4 million payout from the same incentive plan with staff.
While Wolfson will no doubt still receive a very handsome remuneration package, which means he could afford to trade this bonus for some positive PR, the gesture is still likely to spread some cheer throughout the organisation.
A research study of 266 employees, When 3+1>4: Gift structure and reciprocity in the field, by Harvard University doctoral student Duncan Gilchrist, Harvard Business School professor Deepak Malhotra and assistant professor of business administration Michael Luca, published last November, found that structuring a portion of an employee’s salary as a clear and unexpected gift or bonus led to higher effort for the duration of their employment.
But simply offering a higher above-market wage from the outset had no such effect relative to paying a market wage.
Of course, if employees simply receive a token amount while others elsewhere in an organisation receive much more substantial payouts, this is unlikely to have the same effect. However, where schemes are perceived to be more equitable across a workforce, they are likely to be more effective.
While large executive bonuses and remuneration packages are by no means a new development, in this age of seemingly ever-increasing gaps between the highest- and lowest-paid staff, should more CEOs consider sharing their bonuses with staff?