2022 forecasts: Executive bonuses may be reduced

BVWire–UKIssue #33-1
December 7, 2021

At the start of COVID-19, the Investment Association (IA) released guidance suggesting that, where a registered company raised additional capital from shareholders or accepted government support to pay for furlough employees, annual bonuses to executives should “not be expected.” Last week, IA repeated the guidance and extended it through 2022 and perhaps any period of financial difficulty in the future.

IA guidance is not directed at small or family-owned enterprises, but valuers may want to review their assessments of discretionary cash flows available to controlling interests in light of this new statement regarding executive compensation in 2022.

Since increases in base salary drive many executive incentive plans, the IA also suggested that firms—and their auditors—take extra care when base compensation may have a “knock on” effect for long-term compensation as well.

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