Two bits of compensation news caught my attention recently. The first was a Wall Street Journal story reporting that Fortune 500 CEOs are once again raking in multi-million dollar bonuses, a tribute to their lone struggles in coming up with the brilliant strategies that have miraculously restored the nation’s economy and brought their companies back to profitability.
The second bit of news is that, while merit raises are slowly coming back for the minions who’ve been under pay freezes for the last three years, the rate of those increases will likely not reflect the cost-of-living increases and diminished healthcare benefit coverage that average workers have shouldered during that time. Also, it will be up to the individual to prove their worth when asking for a raise – with average performance not being good enough for a 3% increase anymore.
I’ll start by saying that, in fairness, many of the CEO’s cited in the WSJ article have quite publicly forgone bonus compensation over multiple recessionary years and are only claiming their added booty now that profit margins and stakeholder payouts are looking up. In fact, the new financial-overhaul law that took effect this year requires that every business whose stock-market value exceeds $75 million must let investors weigh in (to whatever effect) on rewards for the top brass at annual meetings. So if a company agrees to millions in bonuses for a top exec based on certain preset goals, I certainly think they should pay what they promised.
But let’s face it, when your annual bonus is equal to ten times the average worker’s lifetime household earnings, I don’t think a little added scrutiny or requiring way above average performance ratings is out of line. After all, if the average worker who is living paycheck-to-paycheck has to exceed expectations to be considered worthy of a raise that amounts to 10,000 times less than a CEO’s bonus payment, I personally want to see more rigorous proof of worth. Besides, CEO’s probably have people to keep track of and market their accomplishments for them.
Far from wanting to rant about how this resurgence in excessive top executive compensation is being justified, however, I would just like to take a little time to talk about team efforts. After all, it hardly seems likely that these leaders could be achieving the goals they’re being rewarded for without a dedicated, hardworking group of followers. Seeing as how a lot of brilliant executives’ strategies during the recession seemed to involve laying off all but the most essential and productive personnel – many of whom were then required to absorb multiple jobs and roles, eschew vacations and contribute staggering amounts of un-compensated labor – it seems … let’s say unappreciative … to signal a recovery by doling out millions in bonus money at the top while forcing the underlings to put in additional effort just to secure the scraps that trickle down.
Face it, if you couldn’t find a reason to get rid of a particular functionary over the last few years, maybe they’ve already proved their worth. And when you only have high-performing employees left, at this point they may not appreciate the added hoop-jumping required for compensation increases that used to be considered a base hygiene factor in maintaining a workforce. In the face of that perceived ingratitude, why wouldn’t they be more inclined to take their leave and go prove their worth somewhere else?
With the economic recovery still in its infancy and a brewing talent shortage and war on the horizon, organizations will soon realize that overcoming challenges as a team needs to culminate in sharing rewards as a team. Getting compensation plans up to date and competitive now (as Google did in November 2010) will be a big factor in retaining the lean and engaged team that has kept organizations afloat through the bad times. And if those at the top are truly part of that team and believe in a sustainable future for the enterprise, they may want to save taking the lion’s share of the rewards for a later date.
Is your organization looking to modify compensation policies to offset anticipated post-recovery turnover rates that could reach 75% of the workforce? For top-performing executives, how do you defend a policy that doles out hundreds (if not thousands) of times the rewards to one employee while denying long overdue cost-of-living increases to hundreds (if not thousands) of other employees?