Pay based on performance is a concept that has been around for centuries. No matter what industry you are thinking of, employees are generally given bonuses not only for their personal performance but also based on the performance of the company as a whole. However, these types of bonuses are now being called into question by corporate analysts who are trying to determine if the performance-based pay is actually helping the company in the long run. Based on this new knowledge, lawyers like Jeremy Goldstein are starting to get involved in the discussions.
Giving an employee a bonus based on company performance gives them a sense of ownership over their work. Instead of coming in to make products and perform services for management, they see themselves as working to meet their own ends and get a bonus at the end of the year to reflect all of their hard work. Satisfaction is higher when these types of bonuses are used, and employees are happier. However, many analysts are now saying that executives have too much ability to change the outcome of the company, and employees might sacrifice long-term goals like quality and customer retention in order to meet the short-term results needed to get their bonuses.
Most of these bonuses are based on short-term measures of profitability, such as net income or earnings per share. Sometimes the longest period that a company needs to keep these metrics up in order to get bonuses for the employees is a year. For a company that forecasts sometimes twenty years into the future, this is a very short-term vision that these executives have.
Jeremy Goldstein and his firm, Jeremy L. Goldstein & Associates, has proposed that companies start taking a different look at their plans to make sure that the long-term goals of the company are not being sacrificed for bonuses in the current year. He suggests that the bonus is paid based on a mixture of metrics that are both backward and forward-looking. He also suggests that companies start to look closer at the actions of their executives to make sure all of their decisions are based on the well-being of the company as a whole and not just to increase the bottom line for the current year. Learn more: https://www.americanconference.com/executive-compensation-836l17-nyc/speakers/jeremy-goldstein/
Jeremy Goldstein graduated with his MS from the University of Chicago and his JD from the New York University School of Law. He has been working for years in compensation and human capital law, and he has helped serve several executive compensation committees and Fortune 500 companies in the United States.