Gregory G. H. Rihn (milwaukeesfs) wrote,
Gregory G. H. Rihn

The big, bad, "Bonus"

Continuing to be a bit ambivalent here, I'm growing uncomfortable to the
extent the word "bonus" is becoming a dirty word. Partly, this is
because, like many words, it has been used in a sloppy fashion.
Basically, it implies a gift--like the increasingly rare "Christmas
bonus" that used to be a regular thing at many businesses--a little
something extra in the pay envelope over and above what you had earned
for the year.

Suffice to say that, now and for many years in the past, most companies
have not and are not giving away anything that has not been earned, at
least to the rank and file workers.

While I'd be the first to say that "compensation packages" for major
company CEO's have gotten way out of hand, and have included some very
questionable if not outright improper payments, this isn't necessarily
the case for other employees. It has become a very common practice for
executive compensation--and this includes everyone from sales executives
and first-level managers on up--to have a certain percentage "at risk,"
meaning that, although your annual salary figure includes that
percentage, if corporate goals for your segment are not met, you may not
receive all or any of it. Some times this is called an "incentive,"
"team award", "profit sharing," or , yes, "bonus."

John Thain, former CEO of Merrill Lynch, has famously become the "poster
boy" for bad bonuses, having made sure that multiple billions of dollars
in year-end compensation was paid out to employees before the corporate
takeover by Bank of America became effective. My question is, who got
that money? Because I think it makes a difference.

We have to remember that in most sectors, Merrill Lynch and other failed
financial institutions were performing well, which is why other banks
like BoA are willing to acquire them. So that means that the vast
majority of brokers, account execs, commercial bankers, etc., were doing
their jobs and doing them well. If by seeing that bonuses were paid,
Thain was "taking care of his people" in making sure that people who had
earned the payments would get them, then I applaud his efforts. If on
the other hand, the majority of that money went to senior
vice-presidents or other people directly responsible for the bad
investment decisions that brought the company down, he deserves the
execrations heaped upon him.

I just say this to point out that, like most things, the major media
have seized upon one buzzword and made it a one-sided issue, when, as
usual, the reality is far more complex.

On the other other hand, there's no excuse for spending $1.3 million to
redecorate an office suite, even if the company is making pots of money.
He deserved to get reamed for that--.
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