bonusformål

Bonusformål is a term used in Danish and Norwegian corporate governance to describe the defined aims of incentive bonuses paid to employees or executives. The phrase translates roughly to "bonus purpose" and appears in remuneration policies, annual reports, and board discussions. It specifies why bonuses are awarded and how they support the organization’s objectives.

Purpose and scope: The formål is intended to align pay with strategy, motivate performance to target levels, attract and retain talent, and reinforce risk-aware decision making. It helps separate variable compensation from base salary and provides a framework for evaluating outcomes.

Common elements: Eligibility criteria; performance metrics (a mix of financial targets such as revenue, profit, or cash flow, and non-financial targets such as safety, quality, customer satisfaction, and sustainability); time horizon (annual or multi-year); payout mechanics and caps; and vesting or pay-out procedures. Governance typically requires board or remuneration-committee approval and is often disclosed in remuneration reports. Some plans include clawback provisions to address later-revealed risks.

Variation and context: Bonusformål is used in private companies and public institutions, with differences driven by sector, ownership, and local regulation. It is commonly complemented by long-term incentive plans and retention bonuses to balance short-term performance with lasting value.

Critique and considerations: A well-designed bonus formål aims to reward genuine performance and not encourage excessive risk or short-termism. Poorly defined aims can create misalignment, ambiguity for employees, and regulatory concerns.