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Boards must resist rewarding failure, says ABI

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Firms should resist paying bonuses to executives who fail, according to the Association of British Insurers.

The ABI today published its first report on board effectiveness and issued revised principles of executive remuneration.

The trade body says companies should support “appropriate reward for exceptional performance” but should avoid payments for failure.

The ABI argues that excessive or undeserved remuneration adversely affects a company’s reputation and undermines its operation.

The report on board effectiveness focuses on board diversity including women in the boardroom, succession planning and board evaluation, which looks at risk management and corporate strategy. 

It highlights best practice among FTSE 350 companies and says greater progress and transparency on these issues is needed to ensure an effective board and a successful company.

ABi director general Otto Thoresen says: “Effective boardrooms should be the powerhouse of the UK economy. The board effectiveness report and long standing remuneration guidelines represent UK best practice. They aim to ensure that remuneration is linked to performance and shareholders’ interests are protected.”

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  1. The FSA should also be banned from paying bonuses for failure. What hope of that, we wonder?

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