Woodford IM chief executive Craig Newman announced there had been significant change to the staff remuneration structure from the start of the current UK financial year, 1 April. Discretionary bonuses have been discontinued, replaced with improved salaries and benefits, such as pensions and healthcare.
Newman said: “While bonuses are an established feature of the financial sector, Neil and I wanted to take the opportunity to do something different that supports the firm’s culture and ethos of challenging the status quo. We have implemented a remuneration scheme that is fair and appropriate for Woodford employees and, ultimately, clients. Drawing on our experience of various bonus-led remuneration models, we concluded that bonuses are largely ineffective in influencing the right behaviours.”
Newman explained that he and Woodford are both of the view that bonuses do not improve performance in fund management firms, and can in fact incentivise harmful behaviour. They believe a ‘single salary structure’ will encourage more consistent behaviours, aligned to the firm’s long-term philosophy and client expectations.
“There is little correlation between bonus and performance and this is backed by widespread academic evidence. Many studies conclude that bonuses don’t work as a motivator, as expectation is already built in. Behavioural studies also suggest that bonuses can lead to short-term decision making and wrong behaviours.”
The pair believe this new scheme is fair and appropriate for both Woodford employees and the clients they serve.
This latest move follows Woodford’s announcement in April that his firm will no longer pass research costs on to clients.
