Feature Article - May/June 2009

Incentive Climate Change

Managing Motivation & Recognition Through the Downturn

By Brian Summerfield


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Perhaps nothing about the recent economic downturn has generated as much outrage among the general public as the perception that executives at now-disgraced companies are still living the good life. Rather than suffer through the same trials that ordinary workers are currently dealing with, these mucky mucks are thought to be living it up with extravagant spending—and financing it with taxpayer funds.

Whether it's AIG Financial Products Head Joe Cassano cashing out with $280 million after essentially destroying his company with malinvestment or Merrill Lynch CEO John Thain installing a $35,000 office toilet just prior to his company's distressed sale to Bank of America, the fact is that some modern-day corporate honchos have behaved in ways that make the top-hat-and-gold-watch-wearing robber barons of the Gilded Age seem downright spartan by comparison.

However, there also are dozens of business leaders who played by the rules and are now struggling to survive due in large part to the recklessness of Thain, Cassano and their ilk. These people need every tool at their disposal to make ends meet in this market, including incentives and recognition programs that motivate and reward employees who contribute to the bottom line.

Unfortunately, many of these programs may now be in jeopardy. In recent months, media attention turned to a handful of travel and events programs in a few troubled companies, such as AIG and Northern Trust. Some trips and events these organizations had planned long before the meltdown occurred were portrayed in the press, fairly or unfairly, as luxurious corporate soirees and junkets to lavish resorts. In some cases, these were designed to acknowledge employees' hard work. In others, they were contractual obligations. Regardless of the circumstances, though, they were met with indignation by observers everywhere.

It was in this heated environment that Senator John Kerry unveiled the TARP Taxpayer Protection and Corporate Responsibility Act. Kerry, a member of the Senate Finance Committee, introduced the bill in February 2009 to "get [companies'] priorities straight so taxpayer money is used to get their house in order," he said on his Web site. The proposed law would restrict organizations receiving TARP funds from hosting, sponsoring or paying for any conferences or events, particularly those related to entertainment or holidays.

On the surface, it might not seem like all of this will impact other, merchandise-based incentive programs much. After all, the ire of the media, the politicians and the public is focused mainly on high-end travel and events among companies receiving TARP funds. While bad, it shouldn't cut too deeply into merchandise incentives, right?