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ACCA Strategic Professional · Advanced Performance Management · Sustainability

Delmar Plc is considering linking 20% of its executives' annual bonus to sustainability targets, such as carbon intensity reduction and employee safety. The board is concerned about unintended consequences. Which is the most significant risk specific to this design?

The key risk is that managers focus on the measured targets, manipulate data, or neglect unmeasured sustainability aspects. The 20% weighting does not remove financial focus, many sustainability measures are controllable, and a target-linked bonus stays variable pay rather than becoming fixed salary.

  1. AManagers may meet the easily measured targets by manipulating data or neglecting unmeasured aspects of sustainabilityCorrect
  2. BExecutives will ignore financial results entirely because the bonus weighting is 20%
  3. CSustainability targets are always uncontrollable by executives, so they cannot motivate
  4. DThe bonus becomes a fixed salary element and loses its link to performance

Explanation

Reward linked to a few metrics encourages gaming and attention to measured items only, while sustainability data can be hard to verify. The other options are wrong because 80% of the bonus still relates to other targets, many sustainability measures are influenced by managers, and a target-based bonus remains variable.

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