Cutting bonus for senior staff while raising base salaries
The news story about Morgan Stanley raising its base salaries in response to the trend for cutting bonuses for senior staff bonuses raises important questions for HR professionals involved in reviewing the compensation packages of their executives. After many years of boom when company bosses paid themselves huge stipends over and above their basic remuneration the tide is certainly shifting in this time of economic slowdown. The public outcry caused by such excesses in the last few years has made organizations conscious of the fact that they are answerable to their shareholders. Governments are taking it upon themselves to take certain measures which would ensure that such situations are not repeated.
The news story about Morgan Stanley raising its base salaries in response to the trend for cutting bonuses for senior staff bonuses raises important questions for HR professionals involved in reviewing the compensation packages of their executives. After many years of boom when company bosses paid themselves huge stipends over and above their basic remuneration the tide is certainly shifting in this time of economic slowdown. The public outcry caused by such excesses in the last few years has made organizations conscious of the fact that they are answerable to their shareholders. Governments are taking it upon themselves to take certain measures which would ensure that such situations are not repeated.
It is an incontrovertible fact that some such bonus schemes were inherently flawed, often driven by pure greed with minimal correlation to the performance of the individual. A lot of it was run on the basis of ‘I’ll scratch your back if you scratch mine’. It is only right that one puts a stop to that particular trend. However, do we really need to demonize the bonus system as the root of all evil? Bonus based compensation packages, if used correctly and fairly, are an integral part of motivating employees and rewarding high performers over and above the others. They also provide companies with much needed flexibility in lean period by giving them the opportunity to cut overall compensation costs and staying competitive. This would prove much more difficult for organizations like Morgan Stanley and UBS to amend these salaries downwards if they need to cut costs in the future.
