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Kuwait firms mull performance-linked payouts

Kuwait, August 16, 2010

The trend of performance based compensation will gain ground in Kuwait’s investment sector in the coming months, according to a new study by leading HR consulting service providers Ernst & Young.

E&Y in its recent compensation study said that most companies have not made performance linked incentive payouts 'mainly due to the fact that minimum profit requirements were not met.'

'Compensation levels in the form of guaranteed cash (also known as Base Pay) across various management levels have remained stagnant over the past 2 years, indicating minimal or no salary increase across organizations,' it said.

According to the study, investment companies in Kuwait have faced major financial setbacks since the beginning of the financial crisis that led to significant changes in the way they conduct business.

They adopted a prudent approach to risk and rewards and the trend in 2009 and the first half of 2010 was to freeze or reduce salaries and make discretionary bonus payments.

However, most leading investment houses are now engaging compensation experts to design market and performance based compensation structures.

Though bonuses were largely discretionary, companies are revisiting their incentive schemes and adopting performance triggers that are more applicable in today’s economic times, the study said.

A number of investment companies are also contemplating a review of performance measures and incentive schemes for their companies based on the changed economic climate and revised company strategy, according to the E&Y report.

Most management executives strongly feel that the success of any organization will depend on serving the interests of the shareholders and rewarding employees fairly, even during times of reduced profitability.

Aisha Nadeem, partner, Ernst & Young Kuwait, pointed out that performance targets were relevant and should be tailored to the requirements of the business and reviewed regularly to ensure they remain appropriate.

'Companies in the GCC region are in the early stages of setting up governance norms to monitor executive compensation packages like those in more mature economies. Ernst & Young has been engaged by organizations to help set up charters for board-level compensation committees,” she added.

Waleed Al Osaimi, Office Managing Partner, Ernst & Young, Kuwait, said compensation programs, especially for senior executives, needed to be transparent.

He further lauded efforts to form independent and active board level remuneration committees in the country, saying that they would ensure objective pay decisions and governance.-TradeArabia News Service




Tags: Kuwait | Ernst & Young | performance | Incentives |

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