Posted tagged ‘bonus payments’

Bonus question

December 11, 2010

It is sometimes remarkable how certain groups of people are unable, or maybe unwilling, to understand their own circumstances and to relate these appropriately to the interests of the society in which they live. In the current economic conditions and in the light of the decisions that have had to be taken to facilitate a recovery of the national economy, this is not the time to be claiming or receiving bonus payments on top of a salary, other than in most exceptional cases. Given that our financial institutions caused most of the problems for which the people as a whole will now have to pay, it is almost beyond belief that employees in these institutions are still in receipt of large bonus payments.

As we achieve a reasonable recovery from our current problems, and if at that point individuals can be identified who made a special contribution to that beyond the call of duty, then maybe a reward would be understandable. But right now it will seem to many taxpayers that they are having to face hardship in order (at least in part) to fund special payments for those who got us into the mess. Of course it is always more complex than that, but right now there is a social reality that employees in the financial institutions simply need to understand and accept. No bonuses should be paid, and any attempt to use the law to enforce payments should be faced down.

For the sake of balance, I should stress that I am not against incentive payments, which can make a valuable contribution to success. We should not allow our current crisis to create opposition to legitimate bonus schemes in the future. But making incentive payments at a time of corporate failure in the banks is madness, and accepting them demonstrates an unwillingness to play a part in our national recovery. This shouldn’t be happening.


An academic bonus?

October 30, 2009

Right now the word ‘bonus’ – when applied to special payments that supplement salary – has become a dirty word, suggesting greed and abuse by corporate managers at times when their organisations are failing and people are losing their jobs. So it may seem counter-intuitive for higher education institutions to experiment with bonus payments at this time – but that is what has been done at Kent State University in Ohio. Apparently 820 academics are due to get bonuses of around $2,500 based on progress the university has made in student retention, research income and philanthropic fundraising.

These bonuses are not, however, comparable with discredited practices in the financial world – they are not strictly performance-based; they could perhaps more accurately be described as a kind of profit sharing scheme, whereby a better than expected performance by the university is reflected in one-off increased payments to staff. The university has implied that the existence of the bonus system has incentivised staff to work harder and that it has contributed to improved results. Others are more sceptical, and suggest that while the bonus will be welcome by recipients, it is hard to see how it made any contribution to performance.

In Ireland none of this is possible under our tightly controlled pay frameworks. Nevertheless, as these come under scrutiny and are analysed to assess whether they are fit-for-purpose, one question we might at least ask is whether pay could, in whatever way, be used more deliberately to motivate and encourage staff and thereby improve institutional performance, assuming that such payments are available to a wider body of staff and are paid in a transparent manner. It is at any rate worth asking the question.

A collective purpose

March 18, 2009

Today this blog is coming to you from Washington DC, a place that has traditionally turned itself into something Irish on St Patrick’s Day. And so right on cue, the water fountain outside the White House has turned green for the day.

But amidst the normal Irish bonhomie, in reality there is only one topic of conversation here: the bonuses being paid to senior executives of the insurance company AIG. The latter company, as most people will know, ran into serious financial difficulties in 2008 and was saved from insolvency only through a taxpayer bail-out originally agreed by the Bush administration. More recently the company asked for and was promised more government financial support. And then the US government – now owning 80 per cent of the company – discovered that a number of senior executives were claiming and were to have paid out to them some very substantial bonuses, amounting in total to $165m. These payments are needed, the company has argued, to persuade the executives in question to remain with the company; and they are required to be paid under these employees’ contracts.

The fall-out from all this has been extraordinary, and is still building up momentum. Commentators all over the media and in the blog world are expressing their disgust at the conduct of the company and its executives, but also showing some disappointment with the government for not stopping the payments, contracts or no contracts; indeed the latter complaint has probably directly caused a slight (but noticeable) drop in President Obama’s opinion poll ratings.

My guess is that the AIG executives will not get to enjoy their bonuses; the government will find some way to stop them. Indeed, I would not be too sure about the ‘retention’ of these executives, with or without bonuses.

But the broader lesson, which has validity in all countries now tossed about in the stormy waters of the recession, is that people cannot behave as if the current crisis did not exist, or as if some (particularly those with a hand in getting us to where we are) could claim exemption from the sacrifices and hardships we now have to face. We also need urgently to leave behind us the sometimes audible opinion that it is right that society should now make sacrifices to allow us to escape from this recession – as long as the sacrifice is being made by others, not us. We need a collective purpose now, in which everyone makes the effort and, to an appropriate degree, shares the burden.