Paying Bonuses Without Using Common Sense

Hi Everyone:

Before I begin with today's topic I have to correct a statement I made last week. After posting last week's blog, I found out that Bank of America (BOA) will be paying out bonuses that are in the tens of millions of dollars. I sincerely apologize for the mistake. I do try to be a accurate as possible. But what really gets my blood boiling is that BOA will be paying out those bonuses even though they lost approximately one billion dollars in total as a company and also have not fully repaid the bailout money that they received from all of us taxpayers.

That brings me to today's topic. Ask yourself this question, does it make any sense for a company to pay out bonuses when that company (as a whole), lost a lot of money, i.e.: one billion dollars? If you have any common sense, your answer should be a definitive NO!

My business experience has included working for a couple of very large Fortune 100 companies, with tens of thousands of employees world wide. My business experience also includes working for some small and start up ventures with as few as 130 employees. Most of the companies did have something in common which was: bonuses were part of the compensation package. Another commonality of most of the companies that I worked for was that no bonuses were paid out if the company as a whole lost any money. That meant that bonuses were only paid out when the company as a whole turned a profit for the year. In my multiple location companies, the next step was that the regional area (as a whole) also had to be profitable. Then and only then would a bonus be paid out. Now in a regional area that was composed of multiple locations, there were some individual locations that fell short of their profitability goals and even though the company as a whole was profitable and their region as a whole was profitable, if their individual location lost money, that location(s) was/were ineligible for any bonuses, period. That formula made sense to everyone involved in the bonus plan. The formula also made good business sense.

So why does Bank of America think it is okay to pay out almost $30 million dollars? Let's recap:

1) The BOA company as a whole lost almost 1 billion dollars, so no bonuses should be paid out!

2) BOA has not fully repaid the bailout money it so desperately needed and received, so no bonuses should be paid out!

3) In essence, BOA is paying out the bonuses with some part (who knows how much) of the bailout money, so no bonuses should be paid out!

It is painfully obvious that BOA does not use any common sense. Again, as I said last week, we should all be mad as hell and tell them we are not going to take it anymore.

Good common sense makes good business sense and which makes more cents.

Til next week