Bonus and Pay

During the feverish discussion about the economic turmoil faced by the financial institutions in USA, everyone came to know that the failing Banks and Companies have been 'rewarding' their chief executives with hefty bonuses for their performance. People said, they are disgusted at the obscene salaries drawn by the CEOs and investment bankers in these firms. The graph below shows the raio of CEO to Average Worker's salary in USA.



Even Obama had to admit that it was not proper for the CEOs to come to Washington in private chartered flights, when the purpose of their visit was to request a bail-out!

The famous Bill Kirkman has recently written about the issue of Bonus and Pay. He argues that we must focus more on Pay, rather than on Bonus. Why are we giving Bonus to employees to perform their duties with diligence and conscience, when they get paid to do exactly that? Are we paying salary to people for coming to the office, and then are required to pay bonus to start working? He argues that a good pay should be part and parcel of the contract; while bonus should be only for extra-ordinary accomplishment.

A nice cartoon on this issue of CEO pay and bonus is in this link. Click if you cannot read the cartton below properly.


But, my experience is different from his. From young age, I am used to pay 'Deepavali bonus' to various minions working in Government. Postmen (who deliver letters) were the first, I remember. Every house is supposed to give them Rs.5 or Rs.10. Then, slowly the virus spread and we started getting people from other departments as well - just on the eve of Deepavali. Now, it seems, Sales Tax officers also go on this 'bonus collection' from house to house. Now, the disease is not restricted to Government alone. Milk delivery people, vegetable vendors, sanitation, Newspaper boys ... everyone wants Deepavali bonus.

Organised trade unions have demanded and it is part of the pay package to give 10% or so of the salary as Deepavali bonus in Tamilnadu. All estate workers, transport corporation employees get this year after year. Even small traders give special bonus to all their staff for this festival. Irrespective of their good or bad performance. Even irrespective of the good or bad performance of the company! So, why called it Bonus, I don't know.

Though grudgingly given, I think, such rewards to ordinary workers on festive occasions were fine and create a nice feeling and good will.

Saradha Textiles, one of the biggest cloth shops in Trichy, pays a pittance as salary for their employees, but gives Deepavali bonus in the range of over Rs.25000 to each of them! They would prefer to get this lumpsum amount instead of getting another Rs.2000 as salary every month, it seems.

I can understand that this is a strong attraction for most of the employees coming from rural background. But, for CEOs and investment bankers of western countries? Many people, interestingly, have argued that rich and well-to-do people like them would prefer non-monetary rewards. More about it in some other post.