Letters: Wrongful Bonuses, Intermodal Traffic

These Letters to the Editor appear in the April 20 print edition of Transport Topics. Click here to subscribe today.

Wrongful Bonuses

Are they nuts? Is AIG truly nuts? While it’s very easy to jump on the bandwagon and be fashionable in our displeasure with AIG’s bonuses, if we simply moan without pausing to really explore what we are truly mad about and why, we will not do this issue justice.

I may be simplistic or idealistic, but I remember when a bonus was earned as a reward for work done well and goals met. The shame is that the bonus has morphed into an expectation, not a reward — both by the recipients and the givers.

Employees have been conditioning employers for some time. Bonuses are not bonuses at all — they are expected, almost as if the only criterion was showing up for work. Are employers really in such fear of employee backlash that they are reluctant not to hand out bonuses, even when results aren’t achieved? What about “just say no?”

One Chicago-area transportation business sent a budget-based bonus to its management team at the beginning of 2008. The structure of the bonus plan was as follows: Each position had a targeted bonus. Managers were eligible for a 100% target bonus payout if the company’s gross profit grew between 25% and 30% over 2007. Furthermore, 150% of the target bonus amount would be paid if growth exceeded 30%. But if growth was between 15% and 25%, only 80% of the target bonus would be paid. No bonus would be paid if growth was less than 15%.

Through July, the company tracked 22% year-over-year growth. But beginning in August, the tsunami of negative economic events affected the company. In its short six-year existence, which had beencharacterized by 80% compound average growth, the company and its young owners never had experienced such a head wind. The company quickly learned that its chosen industry — freight brokerage — was definitely not recession-proof. This head wind lasted through the end of the year and continues today.

How did the company end up in 2008? The good news is that while most companies in their sector contracted, the firm still grew about 10%. The bad news is that the managers did not attain the minimum growth needed to get even the lowest level of bonus.

Were they disappointed? Sure. Were they bitter about the missed bonuses? No. They and the company fully understood the “handshake” agreement at the beginning of 2008.

As for the unprecedented bad economic landscape not anticipated when the bonuses were devised, it was just too bad. No adjustments are made for such occurrences. And for 2009, the managers’ salaries were frozen at 2008 levels.

The freight brokerage and its management team understand the meaning of a “pay for performance” bonus — and the company’s managers do not live their lives at a consumption level that assumes a bonus will be paid.

I guess the game is played differently on Wall Street. But why? Why are seven-figure bonuses paid when a company shouldn’t even still be alive? From its board of directors through senior and midlevel management, AIG took enormous risks that jeopardized the company and the financial world. Its chief executive officer fell prey to the same old rhetoric — “without bonuses, top talent will leave.”

To that I say, “If that’s your top talent, please let them leave. They’ve already cost U.S. taxpayers a lot of money. Take a lesson from that Chicago-area transportation company: The gravy train is gone. Hit the bricks.”

Dean Matt

President

MuchoDeanAero Inc.

Naperville, Ill.

Intermodal Traffic

Does anyone know why the container business is so slow? There doesn’t seem to be anything being shipped out or coming in on the ships.

I know that businesses here in the United States are still stocking shelves and that auto industries, etc., still are making parts and sending items overseas.

Everyone knows the economy is rough right now, but hey, life goes on. If you think about it, most of the items you go to buy here in the United States are from overseas, so what is happening?

Joyce [Surname Withheld By Request]

Owner-Operator