Nothing motivates like cold, hard cash. Photo: Jessica Shapiro

WANT to motivate senior executives? Shelve complex and volatile long-term pay incentives linked to the share price and pay cash bonuses that are directly linked to profit targets.

If you want to make executives really happy, take a lead from the perversity of human psychology and realise that they'll accept getting paid less in actual terms - as long as they're paid more than their peers.

An 1100-person global study by PwC Research and the London School of Economics and Political Science, Psychology of Incentive, found that executives do not like risk, do not like complexity and have such disregard for deferred reward that, in their heads, they discount any future benefit by 50 per cent. Younger executives - under 39 - discount the deferred benefit by up to two-thirds.

People prefer a smaller but more certain reward and, for a nation of gamblers, Australian executives rank with Britain as the most risk averse. Only 15 per cent were prepared to swap a certain sum of $41,000 against a variable bonus up to $90,000. The biggest gamblers were China, Brazil and the Netherlands, where 35 per cent would take the risk.

''These findings place a major question mark over the effectiveness of deferred bonuses, which have been championed by shareholders, regulators and corporate government bodies as a powerful way of influencing behaviour while encouraging prudent risk taking,'' said PwC's Tom Gosling.

''Complex pay plans are a motivation killer. It's difficult to see how such a form of pay that has such low perceived value can have a significant influence on behaviour.

''A very real consequence is that as deferral of pay increases, we would expect there to be pressure to increase pay levels.''

Executive remuneration consultant John Egan said there was conflict between what shareholders perceived as fair and what executives believed, particularly post GFC where shares and returns had taken a battering.

''Shareholders believe [executives] should be rewarded for delivering enhanced share value and better dividends.'' Management wanted to be rewarded for the job they did, were generally happy to be benchmarked against similar companies, but disagreed with performance hurdles outside their control - such as currency fluctuations and a volatile market driven by the euro crisis.

Mr Egan said there was ''no question'' pay had ratcheted up in Australia since disclosure started in 1987. But in recent years there had been a trend of proxy advisers depressing executive pay.

The Productivity Commission examined executive pay in 2009 because of a widespread perception that executives had ''been rewarded for failure or simply good luck''. It noted executives viewed ''some complicated long-term incentives linked to sharemarket performance as akin to a lottery''.