Hacker News Reader

Comment by i_am_proteus | Hacker News Reader

>The company’s proposal will reportedly offer bonuses to 19 executives amounting to up to $8.4 million over the next six months if the company is successful in hitting certain financial goals. The employees would also be eligible for more money in bonuses if the retailer is in a position to hit those financial targets when sold, an attorney for the company reportedly said at the hearing.

It appears that the bonuses are contingent on the company hitting financial goals. This is a normal practice of a company in bankruptcy trying to retain talent during a wind-down or rebuild.

View on HN

I love the line "This is a normal practice". Perhaps what is being called into question here is the acceptance of these normal practices...?

Why is there anything wrong with this? The value of these people, to this company, is very high.

People complain all the time about not being compensated relative to their value to the company, but when people are compensated relative to their value, people still complain. There's no win.

Everyone thinks everyone should be compensated according to their value... Unless someone else's value is way more than their own.

Fair compensation also requires fair opportunity to increase one's own value. For most of us, there is no path that leads from "valuable employee" to "indispensable executive", which is where I think some frustration is justified.

Using the word "opportunity" is debatable here. Only so many people can be executives. Just because most don't have the abilities to be an executive doesn't mean they don't have the same oppurtunity.

Most executives don’t have the abilities to be an employee.

The main limit to executive entry is having access to an executive vacancy. The short version is that if you are an honest hard working employee that access will never be available to you.

Absolutely not. In no way should an unskilled worker ever be able to elevate to a skilled position other than through becoming skilled.

You're acting like running a large business isn't a skilled position. It very much is.

A janitor at a hospital cannot become head surgeon by continuing to work as a janitor, and while a janitor is critically important to the hospital, the supply of janitors is such that the pay will never compare to that of the head of the surgical staff.

What I am saying, in the terms of your example, is there is no viable path for most janitors, even if they had all of the necessary intelligence and ambition, to become surgeons.

The typical path to surgeon might look something like this:

High school -> Pre-med -> Med school -> etc. -> surgeon

The path from janitor to surgeon might look like this:

High school -> Married -> Janitor -> Family -> Quit job to go back to school -> bankruptcy, divorce -> janitor

To return to the topic at hand, it's entirely fair for top executives (or surgeons, etc.) to be paid their value, but only if it's also possible for others to try to achieve the same value. Path dependence breaks fairness.

The fairness of one act does not depend on the fairness of another act. It is not unfair to pay executives their worth because you don't pay janitors their worth.

Those two things are completely unrelated.

Acts do not occur in a vacuum. Especially with regard to economic inequality.

And why the fixation on janitors? I never said janitors should be paid like executives, only that the paths to higher paying positions need to be more widely available.

Need to be? Or else compensation isn't fair? No, that's wrong. The concept that everyone needs to be able to be obscenely wealthy or else obscene wealth is inherently unfair makes sense only if you believe everyone is entitled to everything, which simply isn't true.

Everyone is entitled to some things, but no one is entitled to everything.

Compensation is literally a zero-sum game.

No it isn't. A CEO does not make more money because the people under him make less, the money comes from very different places.

If this company owes you money, would you prefer that the core executive team stays around and brings in an extra $200m in revenue during the wind down even though you'll have to pay them $20m to stay? Or just fire everyone, and make nothing?

I'd prefer that executive compensation above a certain threshold was held in trust for 5 years, and clawed back under certain circumstances.

That way the core executive team would be motivated to bring in the extra $200 million _without_ requiring huge bonus payouts for failure.

I think your statement is the sanest I've read in years within the context of similar discussions about corporate.

It's a bit shocking that most other answers seem to accept and justify this status-quo without a flinch.

True, but the effect is to incentivize the type of behavior that the recent Sears management engaged in. It's like having a policy of paying ransom to kidnappers. There's no reason that U.S. bankruptcy law has to allow for this.

The current talent hasn’t done all that well though. Maybe some turn over is needed?

Starting with the owner

The bankruptcy process is literally that.

Maybe! Bear in mind that this is a rather swift process. Finding people who are both capable of and willing to take on this sort of project is not easy. Even if they could be found, they are not likely to have deep knowledge of the internal structure of the company, which is (ironically) critical given that the company is restructuring.

So, perverse as it seems, existing talent with explicitly-performance-linked compensation is often the least worst choice during a wind-down.

It's bankruptcy. It's a failing company. It's ugly. Theoretically these folks are making a lot less than they would have had the company not failed.

I guess then the simplest way to look at the people retained is that they most likely weren't instrumental to the company's downfall and their experience / knowledge / familiarity with said company is absolutely more valuable than their participation in the company's downfall is threatening to future prospects?

It's disappointing how often the knee-jerk "why are they getting paid millions to fail" implication comes around given this is exactly why things happen the way they do. It weaponizes people's desire for fairness.

If everyone was still getting paid it wouldn't be as big a deal. What's happening is that now in the bankruptcy that was either caused or not prevented by this same leadership, they have decided that paying out to employees as per their agreements is something to be axed but they have to keep paying the executives.

They cause the problem and then make others deal with the fallout. Being angry at this isn't weaponizing people's desire for fairness. It's the same as if someone had a factory generating industrial waste that they piped on to your land. They are keeping the profit, and making others pay for it

> It appears that the bonuses are contingent on the company hitting financial goals.

Naturally. That's normal everywhere.

The question is how can the financial goal rewardable with 10 (EDIT: 8) digits be bankruptcy?

Eight digits, as you usually don’t count the cents :)

So if I am an executive looking for a big bonus, just let the company run down to the brink of bankruptcy then accept a performance bonus when I miraculously save it?

Reply on news.ycombinator.com