Big bonuses!? Ask productivity expert Roger Martin
- March 19, 2009 12:53 PM |
- By Your Voice
After growing public anger over news that multimillion-dollar bonuses were awarded to top executives at ailing U.S. insurer AIG, the head of the company urged his employees to give at least half the money back.
It was revealed on the weekend of March 14-15 that the giant insurer intended to pay $165 million US in executive bonuses. This from a company that will benefit from a $170 billion US rescue package from Washington.
The U.S. House of Representatives on Thursday passed a bill that would see some American International Group executives hit with a 90 per cent tax on bonuses they received.
How does corporate pay structure work? What's too much and what works?
Roger Martin has served as dean of the Rotman School of Management since September 1, 1998. He holds the Premier's Chair in Competitiveness and Productivity and is Director of the AIC Institute for Corporate Citizenship. Previously, he spent 13 years as a Director of Monitor Company, a global strategy consulting firm based in Cambridge, Massachusetts, where he served as co-head of the firm for two years.
He took your questions on bonuses and compensation.
Read his answers below.
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Comments (43)
While I understand the potential positive benefits of compensation mixes (e.g. salary and performance bonus) how is it possible to justify the exorbitant executive compensation schemes currently 'in vogue'. Particularly in light of the ratio between US executives and front-line workers in comparison to other nations?
Roger Martin: No, I don’t think it is possible to justify the level of senior executive compensation. I think that there is a flawed model at work. While a relatively small number of CEOs in the US deserve every penny they receive for creating massive amounts of value, too many are paid with the hope that they will produce great things for their company — and don’t. I think there needs to be a fundamental rethinking of executive compensation in North American business.
Hertzberg two factor theory and Equity theory tell us that the cash bonuses are not needed. Are both of these theories wrong?
Roger Martin: I am less certain that I could declare these theories right or wrong. That is a matter of judgment. But what I can say is that the widely accepted theory that monetary incentive compensation produces results that we want and is therefore a valuable managerial tool is grossly exaggerated.
While there is much face validity in the theory — pay them more and they will do more — the research backing up this claim is surprisingly skimpy. A friend at Harvard Business School did a nice survey piece a few years ago looking at the empirical evidence of success in incentive compensation schemes and found little to support it.
If you are interested, you can find Michael Beer’s article as follows: Beer, Michael, and Mark D. Cannon. "Promise and Peril in Implementing Pay-for-Performance." Human Resource Management 43, no. 1 (spring 2004): 3-48.
1) Who decides who gets the bonuses, and how is the amount determined?
2) How does one justify big (or any?) bonuses being paid when a company is losing money? Are they not supposed to be performance-based?
3) Are there grounds to the accusations that collusion, corruption and greed are more at play in these decisions, or are there sound economic principles to explain the apparent paradox implied above?
Roger Martin: 1) Generally speaking, the Board (on the advice of the Human Resources Committee) determines the bonus scheme for the top managers in the company — and certainly the CEO — and awards the eventual bonus based on the previously approved scheme.
2) I wouldn’t draw the conclusion that if a company is losing money, it shouldn’t pay bonuses. If executives accomplish what they are asked in moving a company from losing lots of money to losing a little money, on the way to hopefully making money, it is completely legitimate to pay them bonuses — but only if the performance requirement is laid out in advance and they meet their goals.
That having been said, I am not particularly keen on paying performance bonuses for fixing a bad situation going forward for the very same executives who created the problem in the first place.
3) I am not sure there is a lot of out-and-out corruption. I think there is plenty of naked greed — no question. And there is a subtle form of collusion in which boards get far too much in bed with management and take management’s advice on compensation schemes when boards should be far more independent.
Values and Entitlements...
Living and working as a volunteer in Honduras many average people feel that politicians and many public servants are corrupt, at the same time they note that the same individuals apppear to care little for the plight of the very poor majority of citizens. This inequality has created a two class society and has destroyed a lot of the trust and hope to work for better future.
1)When did the concept of executive bonuses emerge?
2)In the past was there an effective system to guide bonues payments based on real performance, taking into account the sustainability of the corporation?
3)Are the executive bonuses and perks at the root of this story common in all so-called developed countries and sectors, or are they proportionally higher in the US Banking and corporate Sectors?
4) In your opinion can a performance reward system be implemented that is based on society values that will not create a two tiered society...for example why should a banker receive a million $ bonus (even for a exemplary job) versus a doctor or hard working nurse?
Thank You
Roger Martin: Good for you. The voluntary sector is critical to the health of the world. The greatest managerial theorist of the 20th century was the late Peter Drucker and he preached the importance to the economy of what you are doing.
1) The concept really emerged in the wake of an article by Michael Jensen and William Meckling in 1976. (M. Jensen and W. Meckling, "Theory of the firm: Managerial behaviour, agency costs and ownership structure," Journal of Financial Economics, Vol. 3, 1976, pp. 305-360.) They argued that executives have an incentive to work for their own benefit and that is at cross-purposes to the interests of the firm. Out of that critique came the notion that the firm needed to use incentive compensation to re-align the interests of managers and shareholders. So in the 1980s, executive compensation featuring much heavier bonus structures, typically stock-based, came to be popular and universal. So think about the phenomenon being about a quarter century old.
2) No not really. I think that executive compensation has been based on weak theory and even weaker practice. I have written an article in Rotman Magazine that will be coming out in mid-April on the subject. Look for it on our website (www.rotman.utoronto.ca) if you wish.
3) Think of heavy incentive compensation as emanating from the US. It is strongest there and weaker the farther you get from the US economy. However, the compensation theories that arose out of the original Jensen and Meckling article have filtered out across the world.
4) That will be difficult. One of the challenges to the modern world is that inequality is rising as skilled human capital — i.e. talent — is becoming capable of extracting more and more value for its work.
In the case of a hard working doctor or nurse, typically they create value that is not measured in dollars nor do they sit astride a huge value-creating organization. So they don’t tend to be in a position to argue for massive compensation. A large company CEO on the other hand is sitting astride a huge, money-making machine and can more easily convince his/her board that without him/her, the company would make much less money so he/she should earn huge compensation. Let me be clear, I am not saying that this is correct or legitimate.
However, it is an important feature of the modern world. Individual value extraction is in part a function of the value-creating enterprise to which an individual is attached. That is why everyone wants to work for Google. It creates a vast amount of monetary value and everyone there wants to claim that they were essential to the value creation and ought to be paid accordingly. It is a big problem.
"On Wednesday, AIG CEO Edward Liddy, said that some company executives have begun returning part or all of their extra payouts. Liddy said he had asked AIG employees who had received more than $100,000 to return at least 50 per cent of those payouts. Some have "already stepped forward and returned 100 per cent," he added."
Interesting that social pressure - both from the grassroots and politicians - made recipients give money back voluntarily. Is this a sort of soft law or social consensus? Are they acting because they are punished by shame or because they want to belong to a community that shirks excess?
Roger Martin: I think it is wonderful both that he asked and that some gave money back. I wrote a Washington Post piece suggesting that course of action earlier this week. http://views.washingtonpost.com/leadership/panelists/2009/03/fire-the-bonus-takers.html
I think that the only way to stop the ridiculous excesses of corporate behavior and executive compensation is with social pressure. Shame is a powerful force. For a person to be happy, he (or she) needs three things: 1) to feel a valued member of a community; 2) that the person values; and 3) is valued by people outside the community in question.
So highly paid CEOs will be happy if they feel a valued member of the community of highly paid CEOs and they think that highly paid CEOs are terrific and the world outside feels that highly paid CEOs are terrific and laudable. If in fact on the third point, the world outside thinks that highly paid CEOs are egregious, selfish and morally bankrupt, highly paid CEOs will become unhappy and will think about changing their behavior to return to being happy.
If you want to read more on this, you could check out the following article on happiness (what researchers call ‘subjective well-being’):
http://www.rotman.utoronto.ca/rogermartin/PowerofHappiness.pdf
How are 'performance' bonuses in the private sector calculated?
I work in the public sector - Federal Gov't - where performance bonuses to executives when they achieve stated objectives over the year. However, these Performance Management Agreements generally include objectives that are easily achieved or hard to measure. The end result is that you really have to screw up not to get the bonus. Does the private sector work in a similar way?
Roger Martin: There is no single way. Essentially, the Compensation or Human Resources Committee will determine what business performance they would like to have the individual or executive group in question achieve — let’s say for sake of argument, to increase sales — and then create a measurement system for assessing performance — e.g. % increase in sales over prior year — and then set a pay-off formula for varying levels of performance — e.g. 0-5% sales increase: no bonus; 5-7% increase: 10% bonus; 7-15% increase: 25% bonus, etc.
You point out a significant problem in managing compensation. When there are potential bonuses to be earned, management has a strong incentive to convince those who set the compensation plan to set the performance targets low so the bonus is easy to achieve. This in fact is one of the great games played in organizations: how much can managers lie about what they cannot do in order to produce easy-to-achieve performance targets.
Sadly this behavior is rampant in both the private and public sectors. That is why many employees count on getting their full bonus each and every year — and why they get in trouble financially in the type of downturn we are in currently.
What are the three most important functions of these execs?, is their contribution worth this compensation? and why.
Roger Martin: I am assuming you are referring to the Nortel executives and will answer accordingly. Sorry if that is the wrong assumption.
I would suspect that the important functions of the executives with the bonus plans that were approved by the bankruptcy course is to put together a turnaround plan and carry out that plan during the tough times that Nortel is now experiencing.
It is conceivable that their contribution is worth the compensation — that was the view of the bankruptcy court judge – but it is not possible to determine quantitatively. That is completely a matter of judgment, on which reasonable people can easily disagree. That is why executive compensation is such a tricky issue.
since Nortel execs apparently need a bonus to boost their flagging moral, when time are good and moral high, execs would not need any bonus?
Does this not lead to reverse incentives?
Roger Martin: You are pointing out some of the logical fallacies that govern executive compensation. Indeed, if bonuses are given out in bad times and not in good times, there will be an incentive for executives to ensure that the times in question are defined as ‘bad.’ In executive compensation, the logical considerations tend to be quite narrow. This is why there are so many perversities in executive compensation.
For example, people say: we need to provide a really strong incentive for performance! They only think about what a strong incentive for performance such a system will create once put in place. They don’t think about what an incentive this creates for management to argue for low standards of performance while the system is being set up (It is tough out there. Competition is fierce. Just maintaining our current position would be stellar performance.)
The #1 product of incentive compensation schemes is time spent negotiating performance targets not increased performance.
Is it ethical for firms to revoke performance-based bonuses when performance measures have been reached, simply because it looks bad?
Do firms rely too much on bonuses in their compensation structures?
Roger Martin: 1) That is a really interesting question. I think the answer is no if the only reason is that ‘it looks bad.’ However, I think it is ethical to do so if the bonuses were put in place in a fashion that was not in the interests of the shareholders through mismanagement or collusion. In the case of AIG, I believe that the bonuses were put in place by incompetent executives who didn’t understand what they are doing. So I advocate not paying them and forcing the executives to sue to recover them if they wish. I wrote about this in the Washington Post if you wish to look: http://views.washingtonpost.com/leadership/panelists/2009/03/fire-the-bonus-takers.html
2) I am not sure that I could make that general statement. I think the big problem is the structuring of the bonuses. I think that the structures tend to be ill-designed. I have written about that too if you want to have a look: http://www.rotman.utoronto.ca/rogermartin/Love-Hate.pdf
Good morning Mr. Martin.
Do you feel that it is a necessity to pay extravagant bonuses and does this deter from proper corporate responsibility to the shareholders.
Roger Martin: No I don’t think that it is necessary to pay the extravagant level of bonuses that are common. We have an exaggerated and unrealistic view of the efficacy of incentive compensation. It doesn’t work as well as its designers think it does.
And it does deter from responsibility to shareholders. I have written about that in our Rotman Magazine and you might want to take a look at the article:
http://www.rotman.utoronto.ca/rogermartin/Love-Hate.pdf
Thank you for taking my questions.
1. Can you please define the difference between a retention bonus and a performance bonus?
2. The pay gap, bonuses included, between executives and employees is large and seems to be widening. Depending on what source you examine, executive-level salaries may be 100 to 300 times that of the average employee. What justification is there for these pay packages, especially given that many of these large organizations (Nortel is one example) are teetering on the edge of failure?
Roger Martin: 1.) A retention bonus is a much narrower term than performance bonus. The term ‘performance bonus’ would be used to describe any sort of monetary payment that is based on the individual achieving a certain predetermined level of performance. Even professional athletes sometimes have performance bonuses for things like goals scored, home runs hit, etc.
A ‘retention bonus’ can be thought of a one very narrow sort of performance bonus – the performance required is to stay in your current job for a predetermined period of time and not leave.
Retention bonuses are most common during mergers or acquisitions. Often the acquiring company will but in place retention bonuses to keep the acquired company executives from leaving between the time of the acquisition announcement and the closing of the transaction – which can be a substantial length of time.
2.) I think that the pay packages of CEOs in particular have gotten out of line. Boards, to a great extent, are all paying their CEOs as if he/she is an above average, if not top decile, CEO. As we know, only half of people can be in the top half of anything; and only 10% of people can be in the top decile. So this results in lots of CEOs being paid as if they are great when they are in fact mediocre or worse!
I can see bonuses useful as incentives, and in sharing good fortunes.
Isn't regulating bonuses akin to regulating the very fabric of free market capitalism?
Roger Martin: They can indeed be useful incentives when properly structured.
And I don’t think they should be regulated. The last attempt to regulate executive compensation was a complete disaster. Bill Clinton signed a bill mandating that only the first $1 million of CEO compensation of American companies could be deducted from corporate income for corporate income tax purposes. That set off a huge wave of stock option compensation plans that ended up causing the skyrocketing of CEO compensation (because stock options were not included in the definition of CEO salary in the legislation).
The thing to remember about regulations is that they are often a fix that is worse than the problem itself.
I always thought that wages, salary (money) is not actually the prime motivator to get the best performance and productivity from employees - management or otherwise!
(mind you, the pay has to be reasonable and fitting for the job)
Is that not true anymore? - it sure was when I worked for a living, I know because I was a highly productive and recognised achiever - with NO Big bonuses or overblown salary!
My main motivator - I took pride in my work --
Roger Martin: You are more right than wrong. Monetary compensation is typically over-estimated as a driver of performance and non-monetary compensation under-estimated. A culture that provides the pride in work of which you speak is much more important. I have written on this and you may enjoy it:
http://www.rotman.utoronto.ca/rogermartin/Love-Hate.pdf
Mr Martin, I can see how larger and larger bonuses become the norm. Initially the bonus concept was to attract talented employees and it grew or evolved as competition for a limited number of key people grew. The growth was not just in dollars but also in a wider net of acceptable qualities of key people. So the limited number of really good people doesn't change so much as the acceptable qualities has to be "dumbed down" as the market demand grows. This creates a larger overall bonus pool as these people are included in the bonus plan.
Would you agree that this concern for executive bonuses is also about the number of qualified people in key positions.
That perhaps under different conditions of business they would not be in a position to get large bonuses. The wider pool of people are not the brightest in business or the most capable but they filled a void due to their ability to pass in school. With this in mind the bonuses to key people grows as they or their organization compare their skills to the larger group now in the bonus pool.
And their real goal of the larger group is to make the most money for themselves not create a better business, create a better mousetrap or create a better world.
Roger Martin: I had not thought of it this way but I think your thesis makes sense. In fact, it is arguable that in incentive compensation plans, many people ‘free ride’ on the system in place. For example, if you give stock as an incentive to all the employees in the company (as many high-tech start-ups do), a person can chose to work as little as possible without getting fired and reap the same rewards as the person who works tirelessly in the next cubicle.
And indeed, there is a substantial danger in creating an environment in which the only motivation for working is to make money for oneself. That is not the kind of employee motivation that makes for a great firm.
Regardless of what the theories suggests or what best practices promote, when does common sense and integrity play a role?
Roger Martin: It always should and, when it comes to executive compensation, rarely does. You may like my article on the pluses and minuses of incentive compensation:
http://www.rotman.utoronto.ca/rogermartin/Love-Hate.pdf
Concerning morale: Would giving Nortel execs huge bonuses improve the morale of the average employee--collectively those who make up the great majority of Nortel staff and who may not get any bonus?
Roger Martin: I think not. You make an excellent and generalizable point. When I look at incentive compensation schemes, I tend to see extremely narrow logic. So in the case of the Nortel retention bonuses, I can see someone focusing solely and entirely on the morale of a small group of executives and saying: “Wow, we could really keep their morale up if we gave them retention bonuses.
What a great idea, let’s do that.” And if they don’t consider at all the rest of Nortel employees, they would have made lots of sense. But had they asked the broader question, the system dynamic level question, they might have come to a different conclusion.
But I rarely see that kind of comprehensive thinking in executive compensation matters.
Bonuses are usually paid to executives because they meet certain goals. We recognize that reaching the goals needs leadership which is provided by the executive. At least this is the rationale behind all that. However, one must also realises that the day-to-day work that will allow to reach the goal and meet the objectives is carried out by the employees workingfor that executive. Why isn't the bonus share 50-50 or even 40-60% with the executive receiving the lower portion (which will still be quite important as it won't be divided up)?
Roger Martin: This is one of the big problems in executive compensation. Too much of the performance result is attributed to the very top executives and too little to the rest in most plans. CEOs in particular as a class have done a great job of convincing boards that CEOs are responsible for the vast majority of great corporate performance — and interestingly not for bad performance.
I don’t want to diminish the importance of the roles of CEO and top management in the performance equation. But I agree with you that if anything, incentive rewards are tilted too much rather than too little in their direction.
When I invest in company stock thus creating an operating atmosphere for that company,should I not be as deserving of a bonus as the operating faction of that company?
Roger Martin: Not really. The bonus you get is the appreciation in the price of the stock if the company does well. So you would be interested in the company doing as well as it can.
That does open an interesting can of worms though. In many ways, you are in competition with management for the fruits of your joint efforts. You provide the capital and they use it to (hopefully) make profits, some of which flow back to you. The question is: how much flows back to you and how much flows into the pockets of the senior management talent? This is fundamental battle between capital and talent. Since 1980, talent has been doing ever better in extracting value. In the wake of the current crash, we can expect capital to reassert itself in this battle.
Is there any scientifically valid proof that bonuses lead to sustainable levels of greater productivity?
Roger Martin: Not that I am aware of. Clearly there is theory and the theory makes some sense — pay workers more and they will produce more. But people and company operations are more complicated and less uni-dimensional than that. Compensation schemes, including bonus schemes create so many second and third order effects that the simple initial intent is not always brought about.
A big problem is gaming. Those eligible for bonuses tend to game the system to maximize bonus. And the gaming is usually bad for the company.
You may like the following article that I wrote on the subject:
http://www.rotman.utoronto.ca/rogermartin/Love-Hate.pdf
Years ago the magazine The Economist ran an editorial mentioning the excessive amount of money CEOs were taking home.(Comparing it then to the Japanese CEO).
It has taken until now for this to become an issue in the West.
In your view is anyone worth many millions..let alone billions
And are we about to see n abrupt change ? this pattern ?
Roger Martin: Yes the issue has been bubbling along for quite some time now. I wrote a Harvard Business Review article about the subject in 2003. It became a big issue after the dot.com bust and has again. I don’t think anyone is worth billions in compensation. I don’t mind Gates and Buffett making billions as owners. But when hedge fund managers make billions — the top guy made $3.2 billion in cash compensation in 2007 — that is not justifiable.
However, I do think some fantastic CEOs are worth a hundred million or more over a career. Some, like an AG Lafley at P&G have created enormous value and is probably undercompensated — in part because he doesn’t really care much about his compensation.
The real problem is that lots and lots of mediocre CEOs are paid ridiculous amounts because their boards think they will be great CEOs even when they are just plain not. And that I think is going to change. And the change may well be pretty abrupt.
Most people will ask why these people think that bonuses are appropriate, so I'll leave that to the others.
On the the other side of this question, what are the ramifiactions of withholding bonuses? If I bungle a project at my company I am surely not going to update my resume and look for a new job based on my spectacular failure(s). Maybe this make sense to do, but it is not obvious to the majority of the people.
Thank you.
Roger Martin: You make a really good point, Mike. Did AIG really have to pay huge retention bonuses to a bunch of monumental screw-ups? Were lots of firms going to scoop up the guys who spent a number of years selling insurance that was immensely profitable for their company because they didn’t set aside any capital to cover the costs of insurance? Let me assure you, it is not hard to be a genius at that business.
Think of how profitable a business it would be if you went around your neighborhood and sold house insurance to everyone on the street and then took the money and used it to build a lovely vacation property for your family. Then when someone’s house who you had insured burned to the ground, you would simply tell them: ‘Sorry, we have no money to pay for the replacement of your house. I was just kidding about the insurance.’ That is what these folks did.
I agree with you. The risk of them being bid away by eager other firms probably wasn’t exactly astronomical.
The high bonuses are justified by the big companies, whether it's AIG, Nortel, GM or others, as a retention tool for the execs. My question is if the decisions these execs made resulted in massive losses of revenue, profit and layoffs of the people working for them and they still got a bonus in the millions, what does it say about the performance expected from them and why would even a board of directors of a given company want to keep these people working for them? Where's the business sense in keeping people who obviously do not perform?
Roger Martin: I agree, Richard. And you will probably like my Washington Post piece on the AIG bonus: http://views.washingtonpost.com/leadership/panelists/2009/03/fire-the-bonus-takers.html
I do think that the biggest problem is with the misalignment of performance and reward. Too many compensation systems result in high rewards despite poor performance — and that is what drives people (myself included) crazy. Make no mistake about it: designing compensation systems is hard.
But I agree that boards often stick with existing management too long. But I can understand them. Bringing on new management is a tricky business —witness Nortel.
Dear CBC and Roger Martin, Thank you very much for the opportunity for this forum. My question is in regard to pay equity.
At Obama's recent economic town hall in California, in response to the overall rage over these bonuses, the president rephrased the problem as one of equity. While it has long been the practice to regulate the lower end of compensation. Obama raised the point that over the last decade all has seen economic growth for the upper class while the middle class earning growth has been been stagnant. Effectively, keying the axiom of the rich getting richer...
Personally, I've always viewed excessive compensation as extravagant, but is there an ideal ratio to justify a small group of executives being compensated by a factor of 100s or 1000s when their salary is compared to the same company's least paid employee?
Essentially, is there not a fair pay model, that while the employees with the most responsibility are compensated appropriately, the lower level employees are compensated fairly in comparison to company earnings, and not simply the lowest wages mandated by law, union agreements, or workplace market factors?
Roger Martin: It is a tricky question to be sure. I think though that if we are going to be logically precise here, we have to accept that the only regulation with respect to compensation at the lower end is regulation with respect to minimum compensation. So if we were going to be logically consistent, we could only call for minimum compensation regulation for executives. It would not be consistent to twin minimum compensation regulation for low end employees with maximum compensation regulation for senior executives.
I am not in favor of government regulation of executive compensation. The last attempt to regulate executive compensation was a complete disaster. Bill Clinton signed a bill mandating that only the first $1 million of CEO compensation of American companies could be deducted from corporate income for corporate income tax purposes.
That set off a huge wave of stock option compensation plans that ended up causing the skyrocketing of CEO compensation (because stock options were not included in the definition of CEO salary in the legislation).
The thing to remember about regulations is that they are often a fix that is worse than the problem itself.
That having been said, I would absolutely welcome shareholders and customers applying pressure on corporations to be sensible with respect to executive compensation. And I would ask boards who want to compensate CEOs highly to show me the data which demonstrates that high CEO compensation is positively correlated with superior performance. They shouldn’t hold their breath waiting for the answer.
I can understand positive performance being rewarded, but why should negative performance be rewarded ??
Why is it that $20M in bonuses can be approved for Nortel Executives when
a) they are creditor protection,
b) can't afford to pay long term service employees severance under current legislation and
c) reports are that their pension plan is underfunded?
There may be some merit to pay a bonus for measured performance, however, everyone from Pulsen and his 20% return for options speculation to senior execs pulling in exorbitant bonuses for what is tantamount to other peoples’ efforts for clearly temporal gains, not material gains, is ludicrous.
It is clearly BS to say you have to pay these amounts to retain excellent staff, as the Prime Minister of Canada and the senior civil service pull in $150k to $250k, not $1m bonuses to serve Canadians and run organizations with 10s of thousands of employees.
Director’s of corporation listen to people like you, how do you and other compensation analysts justify recommendations of $million dollar bonuses? Essentially stealing shareholder wealth in my opinion.
What about the employees let go without severences. It seems hard to understand why a company in receivership can not pay severence to their long term employees, many of which will now be forced to rely on unemployement insurance at the expense of the tax payers, however the company can just manage to scrap up millions to boost the morale of those poor deflated egos of the top executives.
Are bonuses granted only to employees if the business earns a substantial net profit in recognition for outstanding performance? Agree or disagree? Thanks
My question is similar to Richard's above, and that of many others. I beleive the answer is being avoided and the message is being "spun" to confuse what these retention pays are all about....
Since when do we reward and try to retain those responsible for failing the company? And, who really wants to retain the architects of failure?
They say that the market is competitive and this talent pool may be "scooped" by other companies, therefore, they (WE) have to pay big money to keep them around....yet, one would suggest most companies would not even want to consider hiring somone with a proven track record of sinking a company.
Let's get back to the basic business practice and common sense of rewarding success..not greed!
Do you believe that it is morally correct to accept retention bonuses - stating that these are contractual - while denying severance pay to other employees?
Do contractual obligations only apply to a select group?
We are asking a fox whether eating chickens is good or bad.
No, I think I would like to hear the opinion of a non-academic, especially one NOT educated at McGill, one of the most compromised scholarly institutions in the country: because this institution is supported by big tobacco there is NO non-smoking policy on campus.
Who knows that sort of restrictions Mr ROTMAN put on the business types his money supports, considering the deleterious effects of big tobacco.
Go back to the class room, Mr Martin, as the adults in your class might buy your "logic" but we independent members of the working class won't.
Is it not a little hypocritical denying your employee's raise's while your double standards completely contradict what you tell them? If you feel you need a raise, why don't your employee's deserve one?
We have things like this going on here too. A rep for a local gov. got have a million after only 10 years of work and was getting $300000 a year before that. that is 3.5 million for 10 years of work. now you tell me who the hick is worth that kind of salary especial in any government position.
and as far as folks getting money they don't deserve why would you think it is right to allow it under the circumstances at hand. these people blew it they wouldn't get bonuses if they where under any other system. also how do you justify this at all with people living on the street that these company's should get bailed out at all?
Are these retention bonuses effective in keeping executives on board? If the company gets into some hot water, how often are they out the door after the retention period ends?
I understand that we live in a capitalist society and that a board of directors can determine what the appropriate compensation is for a CEO, but when there is a gross discrepancy betwean what a low level or mid level employee is being compensated for don`t you think a sort of ethics reform if you will needs to be put into place that brings about fairness when it comes to this issue.
When it comes to these bonuses there is almost a deviation if you will from the general principle of work and compensation for work properly done. a frontline worker working for commission won`t get their commision if they don`t deliever.
so why wouldn`t something like this be applied to a high level executive. i.e. we are hiring you for the said project if u can move us from point a to point b you get said compensation. failure to do so u get your base salary. If I am missing something please clarify.
Total annual salary ratios for executives in excess of 15 times that of the lowest paid full time 40 hour per week employee should be made illegal or be taxed completely away by Federal and Provincial Tax Laws.
Why can’t the Federal and Provincial governments find ways to bring salaries of top management more in line with that paid to the lowest wage earner in the company.
Why do boards of directors approve bonus structures that reward executives regardless of performance?
How can this be in the interests of stockholders?
Is it not true that this recession is only a result of greedy executive fat cats on top paying themselves huge salaries and bonuses?
My understanding is that if the executives just take a 1% pay cut, they can double everyone else's salaries.
Because bonuses are paid to management and not front line workers can we assume that management is motivated by money and the workers are not?
Is it true that the "free" overtime put in by lower level employees contributes to a bigger bonus for their manager?
How arbitrary is the bonus? Can it be used to perpetrate more inequity in gender differences?
Is it even possible to expect an unbiased assessment of the managerial class in the western world without their collaboraters in the political class being audited?
You can bet your pension; quite safely; that this will not happen. Otherwise someone would be seliing us tickets for the showdown.
These two groups have been walking down the isle together for 30 years or more. The managerial class filling political coffers in exchange for sheltering big business from public oversight.
The fundamental morals of free enterprise have also been corrupted. Imagine, the Republican's in the US for 5 decades, demonized government handouts to underpriviledged, politically oppressed sectors of American society, as "communist" business theology,that bordered on treason.
Yet it is not odious, favouring bailing out the managerial class? Probably the Democrates are not much better.
It is this duplicity that will ensure that the blatant excesses will be rationalized away, so that the sacred American way of business life, will be preserved for the managerial and political classess.
They know that the labouring classes (flattered into believing they are "middle class") are less and less competitive; overpaid and benefited. Their real labouring classes are in Asia and their manipulated addicted consumers are in the west.
When will consumers use western sceular, critical thinking to see things the way they are and must remain? It's our way off life.
Currently, our western mindset equates positive financial results to a financial reward (salary plus bonus) we are now seeing that negative financial results also equate to the same type of financial reward.
This smacks of systemic elitism. Please discuss your views on the restoration of shareholder and public confidence in the ethics of the profit motive?
Do investors, including government in the case of bailout, receive enough disclosure of compensation packages to avoid putting money into companies that pay out inappropriate bonuses?