Star City fund manager Neil Woodford has done something completely left-field for the sector. He has scrapped bonuses at his firm Woodford Investment Management.
The maverick flies in the face of conventional City wisdom that you need bonuses to attract, retain and motivate staff. Instead, Woodford is to put his fund managers on a fixed salary as he says bonuses have no correlation with performance and can lead to “wrong behaviours”.
Woodford is highly-rated, but will the City be stroking its chin reflectively and then rushing to do the same. I wouldn’t hold your breath. With regard to City thinking, you don’t go broke following the money. Woodfield’s contrarian take on remuneration is unlikely to win favour even it has a strong academic case, both ethically and practically.
The trouble is it takes away the gravy train, and well-paid turkeys don’t vote for Christmas. There is also the undeniable risk that if one of Woodford’s fund managers has a fantastic year, gets assets mix and geographical markets right, what is to stop them being lured by a rival firm that has held on to the bonus system?
In addition, bonuses are the fat that can be trimmed in bad years. Higher fixed salaries, which are the trade-off for them being axed, cannot be adjusted in the same way in challenging times.
It will be interesting to watch Woodford Investment Management’s progress, the fund management names it attracts in future and those it may potentially lose.
But it is a once in a blue moon development. Just don’t expect there is even an outside chance it catches on as an industry norm.
• Sports Direct’s AGM next month should be lively. Corporate governance groups such as Pirc are urging that founder Mike Ashley’s re-election as director be blocked because of his disproportionate influence on the board.
It comes amid reports that Sports Direct has been paying a delivery broker owned by Ashley’s elder brother some takings from website customers outside the UK, but not disclosing it.
The row over what MPs called Dickensian practices at one of Sports Direct’s warehouses rumbles on. At least Ashley has not yet been dubbed the “unacceptable face of capitalism” like his mate, Sir Philip Green.