After reading countless such new stories over the past few months, I cannot help but feel a little bit of amusement by the current outrage against bonuses. Not because the ridiculous salary resentment isn’t justified, of course. It’s because many people are misinterpreting the problem.
In corporate America, bonuses have never truly been bonuses to begin with. We hear the word “bonus” and we think of National Lampoon’s Christmas Vacation, where Clark hopes desperately for the end-of-year “gift” that he so clearly deserves. In the eyes of many of us, this is exactly what a bonus is (and should be).
However, most of us are not corporate executives.
In the world of private jets and multi-million dollar incomes, bonuses are often not bonuses at all, but a planned part of salary dispensation. The executive almost always expects a certain amount that he or she will receive at the end of the year, and it is part of the package offered upon accepting the position in the first place. As we are seeing now, it is incredible that these bonuses are awarded even in the leanest of times, as the company lays off ordinary workers and faces record deficits. But for the first time, this structure is suffering a stress-test across all corporations, and thus has exposed itself for what it truly is.
Why are they called bonuses, then, and not simply included as part of salary? The largest reason may be that it gives the company a false sense of choice. Salary is very permanent, after all, and cannot be drastically altered without considerable effort. Calling it a “bonus” creates a sense that the company isn’t truly committed to the total amount, when in practice such bonuses are almost never denied. As is so often the case, it’s just the way that it has always been done.
So when the headlines repeatedly relay outrage about company bonuses, I am shocked to see many people avoid the heart of the matter: that this problem is systemic. It has nothing to do with bonuses in our traditional sense, but is instead a problem of compensation. In other words, no one should care how big a “bonus” an executive receives, but how much money they make to begin with. How the company chooses to structure this compensation is largely irrelevant, because if they want to channel the “bonus” money to other means of compensation, I think we’d all agree that they’ll find a way to do it. They’re no doubt doing it already.
Now, with the lid blown off of this payment structure, and public outrage continuing to grow, will we have the courage (and means) to demand true change in this system? Will we see increased fiscal and ethical responsibility out of the companies that we pour our money into?
Only time will tell.
