Have You Got Your Bonus Yet? - 21 Jan 2009

Wednesday, January 21, 2009

Have You Got Your Bonus Yet?

I
guess that seems to be the mood and tone of most conversations these
days and there is gossip aplenty what with employees having ample time
on their hands to blabber, scrap, chat or write on walls:) only to be
interrupted by some breaking news of some rumoured layoff or paycut
somewhere or even the occasional utter disbelief of someone getting an
increment or
maintaining their previous year’s bonus!

I
came across some innovative ways that companies are using to pay/
compensate their employees.Here are two brilliant ones that I read
about! The minds that could conjure up the complex structures for the
CDO's, CDS’s and what not are at work again!

Credit Suisse: Pooling of bad loans

The
most innovative undoubtedly is Credit Suisse (CS). The Swiss Bank which
has taken a hit on the chin from the subprime mess in the US, is
planning to create a pool of illiquid assets worth USD 5 billion. The
employees, especially top management will receive equity in this new
pool of illiquid securities.

Now
that’s a brilliant idea! CS compensates its employees without a cash
outflow; the employees get assets that are already heavily marked down
(60-70%), making it more likely that they will appreciate as the credit
markets thaw over the next few years (plus something is better than
nothing and getting something despite creating all the mess is even
better!)and the employees are incentivised to hold on for a longer
period to get the full benefit. That’s not all, it allows CS to avoid
making further writedowns on those assets because any mark to market
gains or losses would be offset by the corresponding losses or gains on
its liability to employees.

What
happens to the shareholders and the creditors? Wouldn’t they want a pie
of this too? Something is better than nothing or as Warren Buffet puts
it..."There might still be some puff left in a discarded cigar butt"!

Goldman Sachs: Converting Restricted Stock to Unrestricted stock

Why
aren’t the Indian firms doing this? Or are they? Accounting for ESOP's
and employee benefits has been an area of debate and a fertile ground
for creative accounting. Now if Ramlinga Raju could get creative with
the most basic and simple form of money i.e. cash, imagine what the
creative minds at work may have done with the ESOPS and employee
compensation numbers!

Anyways
am not advocating any of these fancy schemes or creative accounting.
That’s for the professional's to do(om?). But amateur HR managers can
come up with something much simpler yet useful. For e.g. hotel
companies could give bonuses to their employees in the form of room
nights, airlines can dole out flying miles. Rooms and airline seats are
anyways going empty! So managements can definitely do with some
goodwill plus the additional cash inflow from employee spends on
enjoying these freebies, not to mention the productivity from the cash
saved and the employees retained!

Am sure there are many more ways to do this! Any HR guys listening?!