I tried to resist, but alas, to no avail. The AIG bonus “debacle,” as so many are terming it, reeled me in.
As many of my compensation colleagues have mentioned, it’s hard to comment since we don’t know what the plan says. Only those who designed, are recipients of or are part of the bailout program with access to the plan actually know what it says, how it worked or -- perhaps most importantly -- how it was supposed to work.
My first thought? Empathy for the comp practitioner. I hope they tried to develop a plan contingent on truly measurable metrics that were something the participants should be financially motivated to accomplish. A key element: I hope they had what “fail safes” in place that they could in case the company didn’t meet it’s financial targets or was teetering on the edge of bankruptcy or failure, and, that in the end, the fail-safes weren’t overruled. That often happens so current management won’t be perceived as the bad guy. I was out with some friends last week, all HR types, and the subject of AIG came up. One of my friends doubted my sentiment when I mentioned my empathy, since the fail-safes are all-too-often overridden.
For what it’s worth, it happens.
If you were employed by AIG, would you want those who retain the intellectual property (the core knowledge of the company) or your best performers to run to the nearest competitor, through a rapidly swinging door, almost ensuring the failure and loss of more jobs, yours included? I doubt it.
If you were tapped on the shoulder to help a company through a transition (merger, acquisition, bankruptcy, receivership, failure, etc.), I imagine you’d want some financial incentive to stay, because in the end, there’s a good chance you won’t have a job.
However, in this economy, giving retention bonuses to those that are not critical to the company is absurd. I’ve heard of receptionists getting bonuses. I certainly agree that when a company is doing well, employees at all levels should be rewarded. However, when the bonuses are coming at the expense of an ever-growing federal budget deficit, that’s simply taking advantage of the situation.
Do I think we should legislate or tax away these types of bonuses? No. Were mistakes made in the case of AIG? It certainly looks that way. Should some of the recipients feel guilty? Absolutely.
History is 20/20, hopefully we’ll all learn from this and not repeat it.
Terri Albee is a seasoned independent consultant whose practice has a primary focus on total compensation. She has worked in a variety of industry verticals from start-up/entrepreneurial organizations to the Fortune 500, with both domestic and global responsibility. Her experience encompasses design and implementation of total reward plans at all levels, from the Board of Directors on down. She earned her B.S. in Business Economics from Regis University.
I remember criticism that some of the recipients of the retention bonuses left right after AIG paid them. But that's how you know a retention bonus worked -- when someone gives you notice immediately after it's paid.
Posted by: Theresa Ruiz | 04/28/2009 at 09:16 AM