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These People Are Insane – Or Ignorant

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This just in from the New York Times:

If performance-based compensation is so problematic, what’s the alternative? One possibility is to link pay to the performance of the whole company. Profit-sharing programs, where companies give a percentage of earnings to employees, were common in the United States before the 1980s, but have mostly disappeared since.

It’s true that they have largely disappeared. To be replaced with stock awards. Which are a manner of giving a percentage or earnings to employees on a permanent basis rather than as just a one off, one year, method of doing so.

I mean seriously, these are the people who should be planning our bright new future?

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  1. John Lewis have one but it disappeared this year because the company made a massive loss.
    In the UK partnerships (as distinct from the JL “Partnership”) were relatively common but they involved the partners sharing in losses as well s profits until Enron (an American company: hasn’t the NYT heard of it?) which left *all* the partners in Arthur Andersen US jointly and severally liable and there was a rush to convert into LLPs which protected the partners in just the same way as the profit-sharing schemes protect employees.

  2. Profit-sharing plans were quite common (still are via 401(k) plans but generally are less tied to company profitability) and covered all employees. Stock awards are, I suspect, much more limited to execs or high tech companies.

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