Sales Reps Case Summary

Compensation systems can take on many forms, all of which have positives and negatives related to it. However, certain components are noted to be determinants of solid compensation plans. One agreement of a solid compensation system is the use of incentives. “Clearly a successful companies set objectives that will provide incentives to increase profitability” (Needles & Powers, 2011). Incentive bonuses should be measures that the company finds important to long-term growth. According to Needles & Powers (2011) the most successful companies long term focused on profitability measures. For large for-profit firms, compensation programs should offer stock options. The interweaving between the market value of a company’s stock and company’s performance both motivate and increase compensation to employees As the market value of the stock goes up, the difference between the option price and the market price grows, which increases the amount of compensation” (Needles & Powers, 2011). Conclusively, a compensation plan should serve all stakeholders, be simple, group employees properly, reflect company culture and values, and be flexible (Davis & Hardy, 1999; The Basics of a Compensation Program).

There could be a few options Dax and Mark could incorporate, but the employees may not like them. Hours could be lessened, benefits could be reduced, or insurance premiums could be raised. Any three of these ideas could make any employee angry just to receive their yearly bonus. However, It seems many companies are cutting back on their yearly bonuses because of loss, cutbacks, and the slow economy. Mark and Dex could hold a meeting explaining the issue and what is going on inside the company then give the employees options to choose from so they feel they have a say in what happens to their pay. Having an option makes an employee

Technical Consumer Products, Inc (TCP) makes and distributes energy-efficient lighting products. Emily Bahr was TCP’s district sales manager in Minnesota, North Dakota, and South Dakota when the company announced the details of a bonus plan. A district sales manager who achieved 100 percent year-over-year sales growth and a 42 percent gross margin would earn 200 percent of his or her base salary as a bonus. Bahr’s base salary was $42,500. Her final sales result for the year showed 113 percent year-over-year sales and a 42% growth margin. She anticipated a bonus of $85,945, but TCP could not afford to pay the bonuses as planned, and Bahr received only $34,229. In response to Bahr’s claim for breach of contract, TCP argued that the bonus plan was too indefinite to be an offer.

This situation can lead to negative consequences for a business when its executives or management direct the organization to act in the best interest of themselves instead of the best interest of its owners or shareholders. Stockholders of the enterprise can keep this problem from arises by attempting to align the interest of management with that of themselves. This normally occurs through incentive pay, stock compensation, or other similar incentive packages that now cause the managers financial success to be tied to that of the company (Garcia, Rodriguez-Sanchez, & Fdez-Valdivia, 2015; Cui, Zhao, & Tang, 2007; Bruhl, 2003; Carols & Nicholas,

Such a complaint will generally be brought in the small claims court if the amount is under a certain threshold. Further, employees need not hire an attorney for this type of case as most courts will provide that the employee is entitled to a bonus so long as the contracts indicates as such.

It is clear from the review of the corporate budget that the executives are earning very high bonuses without complying with the promises that were

Things just did get better for some bankers who will get a bonus off the recent US bailout - I don't know how they regulate it in other countries. I, like many, don't understand how CEO's walk away from dying companies with tens of millions. How is that legal? What are their Higher CEO's thinking? It is a mean puzzle to contemplate.

For the company in question the implications can range from loss of earnings, fines, individual managerial prosecution and forced closure of the company in question by law.

The Royal Bank of Scotland - just like many other banks and businesses - paid out its managers considerable bonuses for their performances. Managers at RBS started maximising their bonuses by aggressive actions such as take overs and investing in complex financial products. These actions caused the profits of RBS to grow rapidly, which meant high bonuses for the managers. These actions, however, also meant the stability and financial safety of RBS on the long-term got worse and worse. This was not a problem for the managers as they had already earned their bonuses. A different bonus structure probably would have prevented the reckless actions of the RBS managers.

Whole foods offer large bonuses to managers based on store performance. Whole foods also offer a maximum executive compensation equal to 19 times the average employee salary. Executives had the right to take time off without pay, therefore, increasing the amount of bonus they could be paid within the cap. I don’t think that this compensation strategy is very motivational. It essentially gives executives motivation to take time off work and still receive the same compensation. The stock compensation for Whole Foods is too arbitrary. They should have specific financial metrics that executives should try and meet, and receive stock compensation based only when those metrics are successfully met.

I would argue that the unlimited upside and downside of a manager’s bonus potential based on a single business unit’s performance causes great chaos because it may be driven by factors beyond one’s control and not necessarily as the result of “true” strong performance. Yes, the upside is great! In 2000, the Dermatology group stands to pocket 200+% of their target bonus due to a competitive exit. However, Dermatology’s favorable EVA was driven by unsustainable share gains, a fluke in the market.

Those same 25 executives announcing the layoffs had just one week earlier paid themselves "retention bonuses" of $55 million" (Diekmann, 2005). These employees did not show or use ethical business conduct by making sure they themselves received pay; they are just as guilty as the top executives involved with the accounting scandals.

While those amounts maybe still be rather high; cutting back that 2% in raises and those costs of living increases can close that $26,000 overage, and make room for other incentives that are granted on a smaller scale, perhaps a quarterly bonus for employees that don’t miss any unscheduled days off, or create teams within the bank that can challenge other teams in the bank for free items such as dinner & a movie, gift cards or other non-monetary incentives which could be sponsored by local businesses which could ultimately costs the bank nothing other than some publicity or employee awareness of those local businesses.

The sales team of Florida can’t accept the Social norms from the company that want to take away their bonus. So they have

The principals (the shareholders) have to find ways of ensuring that their agents (the managers) act in their interests.