A Modest Proposal: Stop Paying for Performance

The thought occurred to me this weekend that perhaps we should stop paying -- or at least cap -- performance related bonuses in procurement and supply chain (hat-tip: Tim Minahan over on Linked-in). Over the past decade, it's not been uncommon for top CPOs in large companies to rake in over $250K when factoring in salary, bonus, options, restricted stock, etc. How crazy is this? Show me what they've done to justify that much remuneration. After all, the US is restricting or planning to tax bonuses at 90% in banking, regardless of individual performance. Maybe this makes sense in procurement as well. Since the procurement and supply chain employment base is more captive than that of finance, it would make it more difficult for them to bolt to other industries if we restrict compensation or tax top performers more highly.

Consider this article in the FT that suggests that top trading talent is already bolting from banks to industries where "commodity traders ...can make as much money as they used to" at companies such as BP. Fortunately, our top talent can't swap industries like that. Seriously, there is no reason to wait for the government to start legislating limits to our pay or put us in new tax classes. Let's take the initiative today and limit performance-based pay in procurement and supply chain before Washington forces us to. It might be a modest proposal, but I tell you, it's possible to develop a taste for eating corporate babies once you've downed a few glasses of red kool-aid first. Make mine extra tall and add a few shots of old Soviet potato vodka -- it goes down easier that way.

Ahhh.... Now that I'm loosened up, this whole business of bonuses looks like a problem of semantics. Staying a step ahead of paternalistic totalitarian legislation requires some double speak -- let's call "bonuses" "commission". After all -- and despite the fact that the Feds felt compelled to throw good money after bad -- we're talking about maintaining individual performance incentive here. Not from each according to ability and to each according to need. And besides, when it comes to the Spend Management world, perhaps a reverse "commission" on savings is not too far-fetched from an accounting standpoint.

Jason Busch

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