Figuring out how to calculate bonuses might seem like an extremely easy venture. However, many companies are now calling into question their methods of determining what incentive payments should be, who should get them, and when they should be paid out. In the past, most companies went with the simple performance-based bonuses, in which employees were given incentives for reaching certain targets. With several executives of large companies being found guilty of altering results to get bigger bonuses, companies are calling in the experts to figure out what they should do.
The main argument against bonuses based on performance is that executives have too much influence in the day-to-day operations of the company. If they wanted to, they could make customers hold their orders until the next quarter. They could also keep capital projects on hold until a period in which a bonus is not going to be calculated. Executives are really in the driver’s seat of the corporation, and with bonuses based on performance, there is a real chance that they could intentionally change how they are running the company simply to get a bigger paycheck.
Another reason many companies are rethinking their programs is that employees are only incentivized by performance-based pay to work harder in the short-term. They need to reach targets only once every quarter or year, and they do not have to look five or ten years into the future for their bonuses. This could cause employees to sacrifice future earnings in order to meet their targets today, and that is not good for the overall health of the company.
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The experts being called in to solve this are generally consultants and compensation specialists like Jeremy Goldstein. Jeremy Goldstein created his own firm, Jeremy L. Goldstein & Associates, specifically for the reason of creating a place that companies can go to decide how their corporate governance structures and compensation packages should be created and implemented. Goldstein has helped numerous compensation committees determine the best course of action for their business and the shareholders. He has even been appointed as the Chair of the Executive Compensation Committee of the American Bar Association.
As far as performance-based bonuses, Jeremy Goldstein believes that companies should keep better tabs on executives and hold them accountable for their actions. He also believes that companies should add new provisions into their programs that keep employees from sacrificing future performance for today, looking at more forward-looking metrics instead of the short-term goals companies are used to using. Overall, Jeremy Goldstein is out to get the best and most fair deal for employees, businesses, and shareholders alike.