Remuneration: Value Added System

Bonuses to personnel must be balanced with the company’s short and long term perspectives.

Monday, March 22, 2010

Jorge Londoño, president of Grupo Bancolombia, explained how they applied the Shareholder’s Value Added System (SVA) in this bank, in such a way to prevent short term problems or distortions when applied.

Londoño remarks that “in our philosophy, the size of bonuses does not matter. What matters is that bonuses are related with sustainable profits. In Bancolombia, bonuses are paid 20% to a mutual fund which only invests in Bancolombia shares and from the remaining 80%, a part is paid in cash and the rest goes to an account the employee has in a ‘Bonus Bank’ which allows to withdraw one sixth every six months”.

More on this topic

Top executives: Less Fixed Salary and More Variable Remuneration

December 2013

Performance bonuses and other variable compensation schemes weigh increasingly on the total compensation of senior managers.

In order to motivate and retain executives companies are tending more and more to compensate their executives with salary schemes where the variable proportion and that dependent on performance is increasing.

7 Mistakes in Incentive Plans

April 2010

Employee satisfaction and commitment can increase with incentive plans, which need to be correctly conceived and implemented to be successful.

A poorly designed or executed incentive plan may lead to increased stress in the company, creating more problems than solutions.