We probably need to change the name of bonuses. Of course “incentive pay” sounds too much like a euphemism. Yet, they are a tool for keeping people in line. The criteria for paying bonuses has to be an objective measure but that measure may be somewhat distant from the market. In the last year, we have seen a lot of bonuses paid by Wall Street firms that have angered the public. The public argues that individuals who may have contributed to the decline of the economy should not get bonuses. While I am not in a position to judge the validity of the bonuses, I can see that the recent rounds were poor political moves. They angered a public that was not predisposed to like such payments.
At the same time, I appreciate that each company may have had internal social reasons to pay bonuses. (See my last post.) Yet, they defended the bonuses on economic grounds and, as Drucker suggests, failed to heed the political issues. A corporation needs to do three things: function internally, provide for the aspirations of the society, and sustain a stable society. The Wall Street bonuses may have only accomplished one of the three.