Have You Got Your Bonus Yet?

"Heyy have you got your Bonus yet?! Dunno what will happen this year, job raha to kafi hai!" Sounds familiar?

I guess that seems to be the mood and tone of most conversations these days and there is gossip aplenty what with employees having ample time on their hands to blabber, scrap, chat or write on walls:) only to be interrupted by some breaking news of some rumoured layoff or paycut somewhere or even the occasional utter disbelief of someone getting an increment or
maintaining their previous year’s bonus!

I came across some innovative ways that companies are using to pay/ compensate their employees.Here are two brilliant ones that I read about! The minds that could conjure up the complex structures for the CDO's, CDS’s and what not are at work again!

Credit Suisse: Pooling of bad loans

The most innovative undoubtedly is Credit Suisse (CS). The Swiss Bank which has taken a hit on the chin from the subprime mess in the US, is planning to create a pool of illiquid assets worth USD 5 billion. The employees, especially top management will receive equity in this new pool of illiquid securities.

Now that’s a brilliant idea! CS compensates its employees without a cash outflow; the employees get assets that are already heavily marked down (60-70%), making it more likely that they will appreciate as the credit markets thaw over the next few years (plus something is better than nothing and getting something despite creating all the mess is even better!)and the employees are incentivised to hold on for a longer period to get the full benefit. That’s not all, it allows CS to avoid making further writedowns on those assets because any mark to market gains or losses would be offset by the corresponding losses or gains on its liability to employees.

What happens to the shareholders and the creditors? Wouldn’t they want a pie of this too? Something is better than nothing or as Warren Buffet puts it..."There might still be some puff left in a discarded cigar butt"!

Goldman Sachs: Converting Restricted Stock to Unrestricted stock

Goldman Sachs (GS) employees are suddenly not feeling as bad about their miniscule bonuses. Last week GS announced that it
had changed the way it grants certain stock options which included easing the rules on when restricted stock options could
be sold! Simply put, it enabled cash strapped employees to use their hitherto restricted and hence illiquid GS stock like an ATM! Creative accounting? Well GS says it’s the industry norm and they were conservative earlier.

Why aren’t the Indian firms doing this? Or are they? Accounting for ESOP's and employee benefits has been an area of debate and a fertile ground for creative accounting. Now if Ramlinga Raju could get creative with the most basic and simple form of money i.e. cash, imagine what the creative minds at work may have done with the ESOPS and employee compensation numbers!

Anyways am not advocating any of these fancy schemes or creative accounting. That’s for the professional's to do(om?). But amateur HR managers can come up with something much simpler yet useful. For e.g. hotel companies could give bonuses to their employees in the form of room nights, airlines can dole out flying miles. Rooms and airline seats are anyways going empty! So managements can definitely do with some goodwill plus the additional cash inflow from employee spends on enjoying these freebies, not to mention the productivity from the cash saved and the employees retained!

Am sure there are many more ways to do this! Any HR guys listening?!