In spite of the old saying that a salesperson cannot be overpaid, it seems that one indeed can be. And they were, says Dolmat-Connell, president and CEO of compensation consultants DolmatConnell & Partners. He points to AIG as a prime example of where things went wrong.
“They had traders whose pay was $100,000 a year, but had the potential of earning $20 or $30 million bonuses,” he says. “That caused excessive risk for the organization. When faced with that kind of potential for financial gain, people sometimes do unnatural things.”
Rules issued December 16, 2009 by the Securities and Exchange Commission require publicly traded companies to disclose in their annual proxy statements any of their compensation practices that could subject the company to excessive risk. The disclosures will be a hot topic during the 2011, Dolmat-Connell says.
Public Lessons for Private Companies
If nothing else is learned from the financial meltdown, says Dolmat-Connell, we should at least take away this lesson: Tight oversight of your executive and incentive compensation plans should be de rigeur for companies of all sizes, whether publicly traded or not.
Причина популярности игровых автоматов
Изобретенное и запатентованное в Соединенных штатах устройство, позволяющее “выбрасывать” случайные значения, позволило реализовать на практике игровой автомат, который бы учитывал данные случайные значения. Вековой индустриальный бум, который шарил в США в XIX веке поспособствовал тому, что стали широко использоваться достижения науки и техники в повседневности. Еще в самом начале прошлого, ХХ века выпуск и продажа игровых автоматов как в самой стране, так и за ее пределами давала производителям доход, превышавший выручку от продаж автомобилей и эдисоновских ламп накаливания.
Когда широко распространились игровые автоматы, то так же стало распространяться движение игроков, которым понравилось играть с данным устройством. Это можно сравнивать с теми игроками, которые всем прочим играм, предпочтут сыграть в автоматы вулкан бесплатно , или же заплатить минимальную ставку, чтобы поучаствовать в розыгрыше крупных денежных призов, или же самого джек-пота. В чем же видят радость те, кто выбирает именно игровые автоматы. Попробуем разобрать составляющие игрового антуража, которые заставляют человека играть:
- удовольствие в игре, как причине работы механизмов и дело тут не в том, проигрываем мы, или же выигрываем;
- сам выигрыш все, кто играет, лелеет мечту о джек-поте;
- нахлынувший азарт – поскольку сама атмосфера игрового зала уже сама по себе будет достаточно стимулировать азарт. Тут все важно – и звуковое сопровождение, и сам интерьер, и присутствие выигравших позволяет быстро окунуться в игру и стать ее болельщиком.
Но, всеже самым сильным мотиватором является получение адресной помощи и того внимания со стороны администрации казино, поскольку именно они помогут тем игрокам, которые не справляются сами с играми.
“Particularly when you’re talking about sales compensation, there are things you can do to head off trouble,” Dolmat-Connell says. “A lot of the problems we’ve seen came about with plans that weren’t capped, or perhaps were incenting the wrong things. There is a real belief with AIG, and some of the other companies, that they were incenting people to sell product for short-term benefit without really understanding the long-term implications for the company.”
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Step One: Create a Compensation Review Team
“Take a careful look at your sales compensation plans,” Dolmat-Connell continues. “Make sure they’re incenting the right kinds of behaviors, and that there aren’t any unintended consequences of the metrics you choose.”
Obviously this kind of scrutiny requires time and input from a variety of specialties. Publicly traded companies will be assessing their compensation risks for real; other companies, though, can benefit from going through many of the same processes.
Working with a compensation consultant or outside legal resources, the amount of time required from your own staff will be less, he notes.
However, if you’re curious about how you’re doing and want to take a crack at a compensation risk assessment on your own, start by gathering the people with the most knowledge of your compensation plans such as risk managers, department heads, salesforce leaders, and human resources managers, for example.
Remember—your objective is to identify any compensation plans or practices that might encourage unnecessary risk-taking that could threaten the stability of the company, Dolmat-Connell says.
Step Two: Summarize All Compensation Plans
Once your team is in place, gather information about all incentive compensation plans. Review your company’s compensation philosophy, and compare the plans against it. If the philosophy statement was created more than a few years ago, does it still make sense in light of any changes the company has undergone, a change in management, or a change in direction?
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Step Three: Identify the Kinds of Risks You Face
Next, identify the kinds of risk that could be at play. Risks may appear in several areas including operations, credit, reputation, and others. As it compares the incentive plan structures against the categories of risk, the team should identify behaviors and actions that could promote excessive risk.
For example, a high-profile executive has a greater chance of bringing negative scrutiny to a company due to high discretionary pay than does an employee who is less well-known with a lesser title.
As the process continues, the team should examine the origin of each plan, how it was created, and by whom.
- What is the process for ensuring that the plans are properly executed and tracked?
- Is there more than one individual or department who must review the plan’s payouts?
- Which department has ultimate oversight over the plans?
All of these questions should be easily answered; if they are not, the plans need your attention.
In tomorrow’s Advisor, Dolmat-Connell’s critical steps to take, and an introduction to BLR’s extraordinary HR.BLR.com.