Massachusetts Financial Services’ Pay-To-Performance

The compensation in the MFS system is directly linked to performance as it consists of salary, bonuses, and equity, with salary being only a tiny part of the compensation. Most of the compensation comes in the form of annual bonuses that can be twenty times bigger than the salary. However, in comparison with other investment management companies, fund managers in MFS are not compensated only for their individual performance. MFS fund managers are also paid for teamwork and how other employees perceive them, and their commitment to the team and the company.

According to Hall and Lim, two-thirds of the fund managers’ annual bonuses depend on objective fund performance measurements, while 40% depend on subjectively assessed contribution to the investment process and the company overall. Therefore, it can be said that MFS has a strong pay-for-performance system overall; however, it is different from other companies in its field, as more attention is brought to the overall contribution of employees. In comparison with the industry average, MFS pay-for-performance system may be viewed as a weaker one.

Moreover, MFS believes that fund managers that perform low for one or two years should not be fired but should be supported, as they can demonstrate great results later. For instance, one of the highest-performing portfolio managers of MFS in 2000 was one of the lowest-performing managers in 1996. Overall, it can be stated that the MFS system motivates its managers to balance their efforts and try to excel in both team and individual commitment.

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