End of the Big Bonus Era?

Posted on December 10, 2009

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In a blog post today, Marketplace’s Scott Jagow discusses three important business stories that have been in the news in the past couple of days:

The first two stories got a lot of press; the last item – the speech by Immelt – got less. The part of the speech that generated the most interest was the very frank admission that the financial crisis arose, at least in part, because of serious flaws in the ways that executives and other high earners were compensated (emphasis mine):

Tough-mindedness, a good trait–was replaced by meanness and greed–both terrible traits. Rewards became perverted. The richest people made the most mistakes with the least accountability. In too many situations, leaders divided us instead of bringing us together. As a result, the bottom 25% of the American population is poorer than they were 25 years ago. That is just wrong.

Harsh words from the leader of one of the world’s largest companies. But certainly food-for-thought for benefits and compensation professionals.

There is one other piece of Immelt’s speech that I didn’t see mentioned in news reports, but I found just as interesting as his comments on the roots of the financial crisis, and that is his take on what the U.S. needs to do to maintain a strong economy going forward:

Throughout my career, America has seen so much economic growth that it was easy to take it as a given. But, we started to forget the fundamentals, and lost sight of the core competencies of a successful modern economy. Many bought into the idea that America could go from a technology-based, export-oriented powerhouse to a services led, consumption-based economy – and somehow still expect to prosper.

While some of America’s competitors were throttling up on manufacturing and R&D, we de-emphasized technology. Our economy tilted instead toward the quicker profits of financial services.

Our country was built on great undertakings that brought out the best in government and business alike. But that kind of economic vision, that kind of focus on essential national goals, has been missing.

In other words: it’s time for this country to start inventing and building stuff again. We need to grow our industrial capacity in order to grow the pie. And, as the pie gets larger, we might also want to rethink how the pie gets sliced . . .