BRAIN FOOD: Workplace rights - Pitfalls of discretionary bonuses

BRAIN FOOD: Workplace rights - Pitfalls of discretionary bonuses - Contractual bonus and share schemes are a popular way for employers to reward and motivate staff, but employers usually reserve an 'absolute discretion' as to the amounts to be granted. Th

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Last Updated: 09 Oct 2013

Contractual bonus and share schemes are a popular way for employers to reward and motivate staff, but employers usually reserve an 'absolute discretion' as to the amounts to be granted. That doesn't stop the courts clamping down on unjust exercise of discretionary powers. Nomura International was ordered to pay a trader pounds 1.35 million damages in light of its 'irrational and perverse' decision to deny him a bonus. Similarly, the directors of BPB Industries were held to have had no rational basis for cancelling the share options of Giovanni Mallone when they dismissed him as MD of their Italian subsidiary. Unlawful discrimination is another potential pitfall. Julie Bowers, a shares analyst with Schroder Securities, was awarded a pounds 25,000 bonus while similar-performing male colleagues got six-figure sums. She won pounds 1.4 million in compensation. Extreme caution over exercising discretions is a must.

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