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Is the 'Fat Cat' Bonus Culture Nearing Extinction?

02/06/2014 09:36 BST | Updated 29/07/2014 10:59 BST

Bonus scandals have dominated news headlines over the last couple of weeks. From Ocado handing out millions of pounds worth of share options to directors just days after a shareholder rebellion over outsized boardroom rewards to RBS remunerating its bankers despite plunging losses, AGMs have proven to be battle grounds this year. Whilst it may seem astronomical bonuses are here to stay, our research has shown that there may be a cultural shift underway.

CMI's regular annual research with XpertHR shows that over the last 12 months, Company Directors have seen their bonuses shrink by an average of 23%, that's a staggering drop from £64,594 to £49,767. What's more, this year's bonus figure has been the lowest it's been in several years, and the number of directors receiving bonuses has also declined. Are companies finally starting to take note of public opinion and the negative responses these mammoth pay packets have received? Is this the start of businesses shifting their focus to a model of fairer staff rewards and a move away from these 'runaway' salary headlines?

This change could well be because the economy has turned a more optimistic corner. Labour turnover is at a record low and many managers are choosing to sit tight in their current roles, which could be as a result of 'jobtimism', as employees hope that this return to economic growth means they will reap the benefits if they stay put. Organisations need to capitalise on this shift early if they want to retain loyal and longstanding employees.

Many companies are already ahead of the curve, with John Lewis being a prime example. The organisation puts its staff first by distributing a proportion of its profits equally to partners as a percentage of their salary. This clearly works well for the retailer as the organisation's staff turnover rate stands at 21% per annum, which is less than half that of its competitors. Employee-owned businesses do tend to be more successful, precisely because everyone benefits from the success of the organisation. Next is another shining example, after the company's Chief Executive, Lord Wolfson, recently decided to share his £4m bonus among employees, which is equivalent to a 1.5% pay rise for staff. This shows that it's not just partnerships that are moving in this direction and starting to motivate staff in this way.

This change is interesting, as some companies are taking a further step to diversify away from financial incentives; many are starting to consider other ways to keep staff engaged, motivated and driven - like qualifications, training and chances to progress their career. In many instances, these are just as effective, and if not more so, at boosting moral and motivation within the workplace, than financial rewards alone.

One of the best ways to boost employee engagement is to train and motivate managers to act in a way that chimes with their own ethics. Similarly, offering flexibility of working hours, environment and job roles provides a different kind of 'bonus' that staff respond to. If more employers take this route to fairer staff rewards, 'fat cats' may become an endangered species.