Management remuneration plans and performance   LO4 UBS is a global financial institution with an executive remuneration scheme that includes both cash-based and share-based remuneration and a mix of shorter term and longer term awards. At least 80% of the performance-based award is deferred. At least 50% of the total performance award (or bonus) is awarded through a share ownership plan, in which the executive receives UBS shares that vest in three instalments over 3 to 5 years. The senior executives do not become legally entitled to the shares until they vest. In addition, 30% of the total performance award is awarded under a deferred contingent capital plan. This award does not vest for 5 years and is conditional upon further performance targets being satisfied. The award is reduced if UBS makes a loss during the 5 years until it vests. Required 1. Explain how the use of a bonus plan linked to performance and the deferral of part of the bonus can reduce the agency problems of the owner–manager relationship. 2. How does the senior executive equity ownership plan reduce agency problems beyond that which is achieved by the bonus plan?