What were they thinking – Wall Street Bonuses
January 30, 2009
President calls the $18.4 billion in bonuses paid last year ‘shameful’msnbc.com news services
Jan. 29, 2009
(Read article here: http://www.msnbc.msn.com/id/28916936/)
Anyone who knows me understands my feelings on using bonuses as part of one’s salary – it’s stupid. Harsh words, perhaps. For those of you who remember the tech bubble at its prime – companies gave bonuses and stock options as part of an incentive package and more importantly handed them out like candy as an enticement.
In theory a good idea, in practice, not so much, people tend to rely on the bonus structure as an entitlement. It’s not, bonuses are like fishing lures – they attract people until they are caught in the net and times go bad and people see a third of their income gone for a particular year. The entitlement has become an anchor instead of a lure.
When bonuses are thought of as always being there and then suddenly goes away, everyone gets angry, depressed, or something less than positive – there is a fundamental change in the organization dynamic. Traditionally, when times are bad, the executives will say, “We can’t give out bonuses because we need to restructure and reinvigorate our company. Hang in there, your bonuses will come back.” They seldom come back to where they once were and most people feel cheated because they included bonus as salary.
Companies who use bonuses as “dangling carrots” (I love that phrase) continuously to attract employees are now caught in a trap – if the bonuses are not given – their employees might vote with their feet and leave. Even though the economy is bleeding jobs, talented people may start shopping for hire salaries without bonuses.
When reading the news story regarding Wall Street giving the bonuses (in the tune of 18.4 billion – that’s with a ‘b’), I was shocked at first, but started to realize that Wall Street is doing what they know. What they know is to add bonuses as incentives, in their mind, Wall Street did nothing wrong. In hindsight, the government should have had some restrictive oversight on where the bailout money was spent. Unfortunately, that was never part of the bailout package to Wall Street. Wall Street had Cart Blanche to do what they thought was best for the country and more importantly for their business.
In my mind, this is a WTF moment with a ‘B’. What can be done? Not much, in essence we created the mess and need to step back from what we know and try to create something less offensive. I am not sure what or how to fix it but it seems like we are creating the same mess with taxpayers’ money. For those of you out of a job, my advice is to negotiate a higher salary and leave the bonuses as a ‘nice to have’ – bonuses should never be considered as part of your hiring package.
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One Response to “What were they thinking – Wall Street Bonuses”
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Yes. I agree partially.
1. The original point to bonuses was to reward exceptional performance. This in turn would
2. Attract talented people.
The recent mess with banking and Wall St. is rewarding people for not only poor, but dismal performance.
Let these people leave for higher salaries…they are not the kind of talent needed in that business. I always joke that I could lead those same companies down the path to ruin for half the money they paid those idiots.
DT