What's Good? What's Bad?

“More chief executives are spurning bonuses earned for fiscal 2007. Their voluntary cutbacks, most common among financial companies affected by the mortgage meltdown, don't always assuage demoralized staffers and unhappy investors. And they can stoke anger about other executive-pay practices.

“The heads of at least eight major U.S. companies -- ranging from Bear Stearns Cos. to Zions Bancorp -- turned down last year's bonus, while a ninth requested a shrunken one…

“It isn't unusual for bosses to slash their rewards when business sours. But a sacrifice by otherwise well-paid chiefs rarely impresses the rank and file, says Edward Lawler, director of the Center for Effective Organizations… In some cases, it ‘lowers the credibility of the CEO,’ he says. Corporate leaders are more likely to win favor when they insist their bonuses be shared with troops…

“Warner Music Group Corp. CEO Edgar Bronfman Jr. refused a bonus for the year ended Sept. 30, after receiving a $6 million bonus the prior year. He asked the board pay panel to put the funds into the bonus pool ‘for employees other than executive officers,’ its latest proxy said. Warner swung to a loss for the year. Its shares declined more than 60%.

“Mr. Bronfman turned down between $1.35 million and $1.8 million, based on the range of bonuses awarded to fellow top officers. Warner's compensation committee said in its proxy that it offered bonuses despite the poor results because of ‘unexpectedly challenging conditions in the recorded music industry.’ Will Tanous, a Warner senior vice president, says the company's operating performance was strong, with U.S. sales increasing even as overall industry sales fell 10%.

“Mr. Tanous says some employees viewed Mr. Bronfman's gesture as ‘a morale booster’ …

“Declined bonuses don't always please disgruntled investors. That was clear at Washington Mutual… where CEO Kerry Killinger was eligible for a $1.19 million bonus last year. He told analysts that he wouldn't accept the bonus because of the company's poor results…

“Mr. Killinger was eligible for 32.6% of his bonus, because the company achieved 32.6% of its 2007 goals for certain earnings, expenses and customer-loyalty measures… The foregone award will count toward Mr. Killinger's post-retirement benefits, because he earned the money.

“That's ‘a bait and switch,’ insists Richard Clayton, research director of CtW Investment Group.”

(“Theory & Practice: More CEOs Are Saying No (Voluntarily) to Bonuses; Mortgage Crisis Spurs Wave of Turndowns; Not Everyone Is Happy.” Joann S. Lublin. Wall Street Journal: April 7, 2008. pg. B.6)

WHERE ARE OUR EYES? What performance criteria are we watching? What is excellent performance? Is it unidimensional? What is reward-worthy? What is to be incentivized?

The company lost money; shareholders lost 60% of their holdings, yet a sales increase is trumpeted. And for facing challenging conditions a CEO should be rewarded? Or, for yielding a bit a CEO thinks to be heroic?

How disingenuous are they? How distracted are we?