Compensation and corporate law are getting much more complicated. In the past, many people thought that the only way to reward employees was to give them bonuses based on how well the company did. However, many individuals are now arguing that by doing that, companies might be jeopardizing the long-term success of their companies. They have asked Jeremy Goldstein, a respected and well-known compensation and corporate governance lawyer located in New York, to weigh in.
Performance-based plans work by giving employees incentives to reach certain goals for the company. These goals could be based on earnings or profitability, and they are almost always focused on reaching a budgeted or forecasted number. If the company does well, employees are rewarded, and if the company does poorly, then the employees will get a reduced bonus. These types of plans have been shown to give employees ownership over their performance and the performance of the company.
The main argument against these types of bonuses is that employees will find ways to get their bonuses in one year, but then throw the company to the wayside going forward. Many people think that people will focus only on increasing the bottom line and completely forget about upkeep and client relationships, sacrificing future profits for current year profits simply to get their bonus. They are also worried about executives that have a lot of influence in the metrics, like earnings per share and net income, that these performance-based plans are based on. People believe that executives will halt construction of new assets and stop important capital projects that would be good for the company in the long-run just so they can meet their short-term profit metrics. Learn more: https://thebrotalk.com/bro-recommendations/jeremy-goldstein-gives-us-nyc-recommendations/
Jeremy Goldstein has found a way that all parties can be happy with these plans. He first suggested that executives be held more accountable for the decisions that they make affecting the bottom line of the company. Executive committees need to call into question decisions that are made that do not seem to jive with the long-term goals of the company. Also, metrics that are focused on the future should also be added to the backward-looking metrics often used with these plans. In that way, companies can be assured that employees will not be sacrificing the future for the present.
Jeremy Goldstein has worked for years in this field, and he has helped hundreds of companies determine the best strategies for compensation. His firm works mainly with companies going through major transitions, and he has served as a sounding board and confidant for several executive committees in the United States.