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Incentives for managers

Incentives for managers: 1. short – term bonus (annually rewards): Short – term bonus sets incentives for manager’s short (or temporary) eff...

Incentives for managers:

1. short – term bonus (annually rewards):

Short – term bonus sets incentives for manager’s short (or temporary) effective performance. The amount of bonus will closely relate to the total profit of the company.

In general, there is no peculiar formula for calculating the bonus rate for managers and CEOs. Each company has its own rate calculation, usually from about 10 to 12% of 95% of company net income.

The higher level the managers are, the more the bonus will be. For example: A CEO has the annual salary of 150,000 USD may get the bonus of 85% of his salary, meanwhile a manager with salary of 80,000 USD in the same company only gets a bonus of 30% of the salary, and the bonus rate for low level managers are only at about 15% of salary.

Remember that with excellent managers, there should always be adequate bonuses for them, meanwhile with the bad ones, there shouldn’t be any.

2. Long – term Bonus:

Long – term bonus is used to motivate managers to develop the company in the long – run. If there are only short – term bonus, the managers may only concentrate on increasing the company profit in short – run but leave alone good investment opportunities for the company long – term profit later.

In addition, long – term bonus also motivates good employers to stay with the company. The method is that the company rewards them with certain number of company share (this may help multiple the manager’s basic salary many times; the method is very complicated and flexible.)

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