March 27, 2009
The Bonus Furor
– Broc Romanek, CompensationStandards.com
Fueled by the anger over the AIG bonuses, the focus now is on bonuses generally. As we all know, a focus on a single pay element doesn’t really make sense as the totality of the pay package is what really matters. But the public (and most of the media, Congress, etc.) isn’t used to dissecting complex executive pay packages.
Anyways, companies may now be moved to rename their “bonuses” as something else due to their stigma, as noted in this NY Times article yesterday. And the concept of retention bonuses may need to be reconsidered, as there clearly have been some abuses in this area. I agree that retention bonuses make sense in particular circumstances – and can even be critical to save a company from imploding. But – like everything in life – sometimes there are mistakes and even purely abusive situations.
Occasionally, it’s also hard to make retention bonuses sound “right” to the masses, even though it makes sense for the company. Perhaps some of the AIG bonuses fall into that category as I read this resignation letter from one of the AIG Financial Product Unit executives. Notice the letter has over 900 reader comments.
As a sidenote, the reality is that the economic downturn has forced many companies to cut executive bonuses, as noted in this Watson Wyatt report.