Finding fair and efficient ways to pay executives is a big problem, in both the private and public sectors. Many companies and, increasingly, governments are devising complex pay packages intended to motivate their leaders to perform. Some think the answer is pay based on annual individual performance. But, especially in the public sector, this is highly questionable.

Of course the general level of pay is important – it affects the choice of occupation and of job. Promotion should also be on merit, so that the best people get most responsibility and the pay to go with it. Rigorous forward-looking appraisal is vital too. But that is different from an annual appraisal focused on the past – and whether you performed well enough to deserve a bonus.

Yet in a review commissioned by the British government, Will Hutton recently advocated a more elaborate system of performance-related pay for senior civil servants. Under Mr Hutton’s system the best would get more, while those below par would lose pay. Yet for teamwork jobs, like those in a government department or a large business, there is little evidence that individually-based incentive pay works. Indeed, there is plenty of evidence against it.