BOSTON — MFS Investment Management, once reputed to have a genteel, country club culture, is injecting a bit more "law of the jungle" into its compensation system to bolster its equity performance.
Robert J. Manning, chief executive officer, president and chief investment officer, said the new setup is much less subjective than before. The basic outline remains the same, with portfolio managers earning a salary that is usually a fraction of the variable income, or bonus, awarded each year. Roughly two-thirds of variable pay is determined by a manager's three-year performance numbers, and one-third is set by a "360-degree peer review" by colleagues, including analysts and traders.
Now, however, when the two-thirds of the performance pot is divvied up, it will be skewed to provide far greater rewards for consistent performance. The "best-performing people will get paid many, many multiples more" than those who consistently trail their benchmarks, Mr. Manning said.
Company officials declined to detail how much more a top-performing portfolio manager might earn.
It's unclear how popular the new system will be, but people who gravitate to portfolio management like risk, and they have to accept the downside of risk, he said. In this case, the downside is "if you don't perform, you can't stay at the firm," he said.
The compensation changes reflect a renewed emphasis by management on promoting "meritocracy" at the firm, and part of that process is holding portfolio managers accountable for their performance, Mr. Manning said.