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ROCE / dysfunctional ??

Forums › ACCA Forums › ACCA FM Financial Management Forums › ROCE / dysfunctional ??

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
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  • December 7, 2021 at 10:12 pm #643004
    abi712003
    Participant
    • Topics: 12
    • Replies: 4
    • ☆

    Can someone wxplain why using ROCE to evaluate projects is dysfunctional behaviour encouraged by performance related pay?

    December 8, 2021 at 7:06 am #643048
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54774
    • ☆☆☆☆☆

    Performance related pay might encourage dysfunctional behaviour because the managers might manipulate the profits so as to show more profit in the current year. This would result in them getting more pay if their pay is dependent on the level of profits.

    I do explain this in my free lectures on divisional performance.

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