Cockpit
Statements
What we say
The traditional approach to performance measurement is misleading
The flaw in the traditional approach to performance measurement is its inability to distinguish between operating performance and the impact of the economy. Indexed operating performance eliminates the impact of external factors to measure only true performance. Indexing also enables comparability across businesses, time horizons and financial metric.
Read more: Benchmarking in Boards (German), Preparing Companies for Outperformance (German), Stern's book "Marketoriented Value Management" and articles about Economic Value Added and the Obermatt products Indexed Strategy Controlling and Indexed Investment Valuation.
Traditional bonus plans – including stock prices as a motivational component - reward the wrong behaviour
Traditional bonus plans have many flaws which have resulted in bonuses which are not aligned with performance. Basing bonuses on stock prices exposes them to external factors, including irrational behaviour that can also influence stock prices. Neither bonus caps, shareholder votes nor regulation can solve this problem.
Read more: Financial Times, brand eins, Harvard, Neue Zürcher Zeitung (empirical evidence presented), Finanz und Wirtrschaft.
Obermatt's indexed bonus plans are fairer for both managers and shareholders
An indexed approach to bonus plans rewards only management's true contribution. They are fairer for managers because bonuses can be earned in upturns and downturns. They are also fairer for shareholders, as they compensate true performance without the temptations for irrational behaviour.
Read more: crises proof bonus systems, Finanz & Wirtschaft, VDI Nachrichten and Financial Times.