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Sunday, May 29, 2011

Furloughs, but Paydays for the Brass

Your story about the management excesses at Gannett at a time when the firm was laying off staff and insisting that the survivors take furloughs shows the disconnect between the executive suite and the ordinary worker in America today (Furloughs, but Paydays for the Brass, New York Times, April 11th., 2011: B1, B3).

But it is a disconnect that will come at a price. All the research on downsizing, except that following a merger, shows that the economic benefits of downsizing are unlikely to occur unless a firm's top management share the pain -- something that Gannett claimed would happen but then failed to implement (with top team bonuses totaling $3 million). We can therefore expect that Gannett will continue its inexorable financial decline.

There is one simple way to change the situation. Let differential responsibility be reflected in basic compensation. But let every employee share the same percentage bonus (based on overall firm performance) as that of top management.

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