Strategy and Executive Reward: The Mis-Match in the Strategic Process

In many British companies, senior managers are rewarded through systems that are inconsistent with declared corporate strategies. The purpose of this paper is to demonstrate a conceptual model against which senior executive reward systems might be developed. We begin with a review of corporate portfolio theory to show how conceptual models of the strategic management 'problem' (particularly that of the Boston Consulting Group and its derivatives) currently help explain the structure and behaviour of diversified companies. We then suggest that parallel development in reward systems for top management is largely missing from the equation and that most practice in this area is out-dated. We conclude by developing our own model for top management remuneration systems. The model we suggest is an ideal type model which we believe may be used to stimulate practical developments based on actual strategic situations.