Aug 6, 2017
Investors fear accounting arts being used to trigger big bonuses
Large investors fear FTSE 100 companies are using clever accounting techniques to trigger high executive bonuses and mask poor financial performance. The revised figures are typically higher than actual profits booked, and are an important metric when determining executive bonuses. Mr Millington blamed the growth in the use of adjusted profits on pay for management teams increasingly being linked to revised earnings, and low interest rates supporting an M&A boom. The five FTSE 100 companies that generated the worst total shareholder returns over the past decade had large net profit gaps of between 58 per cent and 1,000 per cent over that period. "Companies are looking for ways of showing optical growth so they don't have to report declining results. Manager pay is increasingly being linked to earnings-based measures, so there is increasing motivation to boost those measures," he said.
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