Woodford Investment Management founder Neil Woodford has scrapped staff bonuses at the firm, arguing bonus payouts do not encourage the right behaviour.
The move was introduced in April for the company’s 35 staff, including sales people, fund managers, analysts and compliance staff.
Staff were able to choose to stay on the previous pay scheme but all opted for the new arrangement.
Salaries were increased this year so that on average no employee would be worse off, with the move said to be cost-neutral.
Woodford chief executive Craig Newman says: “While bonuses are an established feature of the financial sector, Neil and I wanted to take the opportunity to do something different that supports the firm’s culture and ethos of challenging the status quo.
“There is little correlation between bonus and performance and this is backed by widespread academic evidence.
“Many studies conclude that bonuses don’t work as a motivator, as expectation is already built in. They also suggest that bonuses can lead to short-term decision-making and wrong behaviours.”
For the year to March 2015, Woodford paid a total of £6.8m in staff wages, which works out as an average of £225,000 for each employee.
Earlier this year Woodford Investment Management moved to a new company structure. The structure means no staff own equity in the business, with Woodford controlling 65 per cent of shares in the new company structure, while chief executive Craig Newman owns 35 per cent.