Scratching My Head

Posted on Monday, December 8, 2008 by Frank Roche

I don’t know what to make of this. Can there be large executive bonuses when a company has been run aground?

User Comments

Mark Szypko

Dec 8th, 2008

Proving once again the high degree of correlation between stupidity and an ego that can apply for statehood!
Ron Ulrici

Dec 8th, 2008

Frank… where have you been? The world is now upside down. I assume they are now punishing execs for making profits. Oh, yeah – like congress wants to do to the oil companies.
Dan Erwin

Dec 8th, 2008

Although I find bonus requests more than amusing, I'm also aware that business has never gotten into any kind of serious discussion about what is and is not moral re salaries and bonuses. As a result, most of us take our own approach to personal morality and apply it to business. Shifting contexts doesn't usually work–and I don't believe it works in this situation. As a result, I'm ambivalent about such issues. It's not that I don't have any strong feelings about the morality of certain bonuses or salaries–it's just that long ago I quit trusting the state of my glands. That doesn't mean I have no ethics or no morals, it's just that I'm uncertain about how to apply my personal standards to differing contexts. And that from a person with graduate studies in ethics and morality…So I leave it to industry.
Frank

Dec 9th, 2008

This one just astonishes me. Wow.
Frank

Dec 9th, 2008

Ron, the world is upside down. Man…
Frank

Dec 9th, 2008

Dan, that's why this one has me scratching my head. I wrestle with the cognitive dissonance around this: On one hand I think I'm a free market guy; on the other hand I wonder when common sense prevails. I'm okay with people making a lot of money when the company makes a lot of money..ethically. But I have a little trouble when people make a lot of variable pay when there are government bailouts. I have to do some more thinking about this…not sure I'm going to solve it even for myself.
rick

Dec 9th, 2008

Before jumping to conclusions, let's put this in perspective. Wall Street CEOs have become accustomed to bonuses in excess of $100 million so Thain can argue that $10 million is a massive pay cut.
Also, he was brought in after most of the damage was done by the prior CEO and that the $15 million he got as a signing bonus does not count when assessing this year's pay–that was just a cost of getting him to take the job. The Fed bailout and the purchase by Bof A saved the company and he made that happen. That alone is worth $10 million.

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OK. Just kidding. There is no perspective other than the company failed while he was in the job. He would have taken many millions if he had somehow turned the company around and the only fair pay for performance is a big goose egg. Had you going there for awhile.
Frank

Dec 9th, 2008

Dude, I am really conflicted about this one…you had me going, but I'm afraid it's because there's truth in both arguments. I go with goose egg this year…but I could be wrong.
rick

Dec 9th, 2008

Frank, $10 million is $10 million and too many of these people just do not understand that simple fact.
Frank

Dec 9th, 2008

That's it…$10 million feels like bupkis to them…crazy.
Joanne Bintliff-Ritchie

Dec 18th, 2008

Another problem this illlustrates is the lack of clarity between what performance outcomes connect to pay vs bonus. In this case, I think the action he took to protect shareholder value is a performance requirement compensated by pay. It should not merit consideration relative to bonus. Employees, even executives, seem to think that a bonus is for doing our regular job really well. Normally that is what pay increase differentiation is designed to recognize. Incentives, particularly for executives, should be about company performance – period. Barely rescuing the company from total disaster would not seem to qualify as stellar company performance.
Frank

Dec 22nd, 2008

Joanne…that is a super way of thinking about this bonus situation. Merely doing what you're supposed to do doesn't seem to warrant a bonus…especially of the $10 million kind.