With increased global competition from low-cost economies such as China and India the Government is urging UK firms to adopt smarter business strategies. In this new world, the Government believes that to be successful British companies need to focus performance on ‘value added’. To promote this approach, it compiles its own value added scoreboard every year and following the release of the latest results Steve Tatton and Steve Glenn, editor and deputy editor of the IDS Executive Compensation Review respectively, ask, are boardroom incentive schemes meeting the value added challenge?
To answer this question, this article examines the increases in directors’ total earnings and growth in value added over four years. The results, illustrated in tables, show that there is no discernible link between directors’ pay movements and wealth creation and lead to the conclusion that despite the focus on improving pre-tax profits and shareholder value, existing incentive schemes are not producing the desired results.
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