The Advisors' Blog

– Fred Whittlesey, Hay Group

Following up on Broc’s recent blog on semiannual bonuses, we should remember that a lot of technology companies have had shorter incentive compensation cycles for many years and the practice appears “indefinite.” This is a fairly common practice for technology companies with roots going back to the early days of Silicon Valley culture, the quarterly “cash profit sharing” plans. The founders would gather all employees together at the end of every quarter in the employee cafeteria and pass out the quarterly bonus checks one by one. The system has matured a bit over time but the quarterly and semi-annual basis remained.

So, while this is “news” for some of the traditional industries, it’s old news in the tech sector. (My colleague in our Retail Sector practice notes that semiannual incentive plans have been common in that sector as well, due to the spring/fall cycles for many retailers.)

Messrs. Feinberg and Bebchuck should take a total pay perspective and realize that in some companies the same employees who are purportedly incented to “cut corners” also have a large portion of their pay in stock-based compensation, more so than executives in some companies. There might even be a correlation between these “awful” compensation practices and the high levels of innovation that have brought us the iPod, iPhone, Amazon.com, Google, broadband internet access, wifi, Twitter, Facebook, LinkedIn…the list goes on.

Just a little history for context in this discussion.