The top management at a UK buyout firm will not receive their bonuses this year, according to a company report.
3i Group said in its annual report this month that neither the firm's management committee or its executive directors will get an increase in their base salary, reports the Wall Street Journal.
The surprise decision, the company say, is due to a "sharp fall in 3i's share price," adding that "the committee did not think it would be appropriate to pay bonuses at all with respect to 2008-09 to executive directors and other members of the management committee".
Bonuses pay outs at the company will be reduced from £56 million last year, to £8.6 million following the move.
Management skills are likely to be tested, as the company attempts to reduce debt through a £700 million rights issue before it enters the FTSE 100 at the next reshuffle of members.
The news comes a week after a row erupted between the GMB union and Remploy over bonuses.
The GMB union said directors at Remploy were paid over £1.7 million in bonuses in 2007/8, an increase of 40 per cent, in the same year as 2,500 workers lost their jobs at the firm. Remploy have subsequently confirmed that this is the total amount for the entire company however and not just the directors, who received bonuses of £192,000.
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The bonus culture created over the past few years has reached the ridiculous stage. It started off that bonuses were linked to performance, then organisations started paying bonuses even when performance didn't merit the additional payments.
Why would you want to reward poor performance and where is the motivation to perform well if you're guaranteed a bonus?
Now the problem is that staff will perceive management are dissatisfied with their performance because the bonus payment is being withheld and they will become demotivated because they may believe they have (and may actually have) performed as well as they did last year but due to external factors have lost their additional payments despite having absolutely no control over these factors.
Its interesting that 3i should so chose to get rid of bonuses - when actually the management there haven't actually made the same stupid decisions that bank managers have.