Saturday, March 7, 2009

Bonus Disclosures – Ethics?

On the front page of any business section is the quest by NY AG Mario Cuomo to obtain information from various companies about the bonuses paid to employees. In particular, he is focusing on Merrill Lynch and Bank of America. Although the part of me angry with Wall Street applauds his actions, the "employee" in me feels he has gone to far.

  • Public companies must disclose the pay packages for their top executives. Nothing Cuomo does will change that.
  • Employee Privacy? IMHO – unless there is provable evidence of wrongdoing by the employee, the employee should not live in fear of having his/her compensation package end up on the front page of the Wall Street Journal. Yes. Some of them made enormous sums of money at the same time their company struggled. No. That does not mean the employee (or even the company) did anything illegal.
  • Pay for Performance: Even when the company (or even the business unit) is losing money doesn't mean the employee should not be compensated.
    • Some employees are in businesses that are making money for their employer. If they are top performers and adding to the company's profits, they should be compensated.
    • Employees in money-losing businesses. If you have top performers in a money-losing business, you will want to compensate them to prevent things from getting worse. Furthermore, you may need to pay top performers to "fix" things they did not create. For example, I led a project team for my former employer that caused an immediate hit to earnings. They gave me a bonus, a promotion, and an award. How is that possible? Simple, we had a business unit that was losing money every year. Our project team sold the business and improved our long-term profitability.

Next week, I get my bonus (not millions). Even though it is not a ridiculous amount, I do not want in published in the local paper.

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