Morgan BellColes Bribes its Top Executives
December 12th 2006 11:59
Coles is offering scandalous bonuses to its top executives for the attainment of certain sales targets. And is Coles performing? How do you think managers should best be compensated? Stay with me for more.
The news today, 12 December 2006, is that “dozens of Coles Group executives are set to make millions of dollars under a new bonus scheme, as the struggling retailer goes to desperate lengths to retain staff.”
“As morale inside Coles plummets over emerging fears about its financial performance, the company has offered 80 of its most senior managers cash bonuses worth 50 per cent of their pay packets. The retailer has guaranteed staff that three-quarters of the promised bonus will be paid if last year’s profit of $787 million is matched.”
“The generous package, which chief executive John Fletcher unveiled to the senior management team on Friday afternoon, is the retailer’s latest attempt to rally staff support as morale slips under the weight of cost-cutting and restructuring. Coles is slashing 2500 jobs elsewhere in the organisation.”
“The (a leaked) report showed comparative store sales – excluding Bi-Lo – gained just 2 per cent to $5.7 billion for the year to November 26. Sales for Bi-Lo were down 1.5 per cent over the same period. The stores are rapidly being converted to the Coles brand.”
“Most of the managers who have been promised bonuses already earn six-figure salaries, with several taking home more than $1 million a year.”
“Last year its top seven earned more than $28 million.”
This news was published in the online version of The Age under the title “Coles throws cash at morale crisis” and was written by Rebecca Urban. Click here to open that page.
It’s amazing how some companies now-a-days compensate their executives. The sums which we read about from time to time are astounding and often they come without comparative gains for the shareholder.
Sometimes I think that some public companies become vehicles that management assails in order to extract from them their own benefit. It’s sometimes not quite that management is there to uphold the best interest of their bosses – the shareholders.
I know I don’t write sweetly about this topic but I don’t think I misrepresent it also.
There are many ways to compensate management. Here are some examples: (a) by providing career progression and meaningful work and recognition; (b) by providing options to be exercised when certain share prices are attained; (c) by providing cash bonuses in addition to existing salaries; (d) by providing tax advantaged benefits as part of an executive’s salary package.
The use of options lately has become quite scandalous. Options are supposed to stimulate an executive to work towards the achievement of a particular share price target and, in part, I believe, they produce that effect. But they do not punish the executive for not achieving its share price target. If the option price is not achieved nothing happens.
Shareholders instead, suffer with failure and underachievement. Shareholders have a downside: they can lose money if management does not perform.
So, I say, why should management be pampered with options – why not turning it responsible with shares. Yes, companies should, not quite offer options, but loans for the purchase of shares.
This way, a manager would think and act, not like a hired gun – but as a business owner, which is the best, most motivating and responsible way for him to think. And the best for shareholders also.
End
The news today, 12 December 2006, is that “dozens of Coles Group executives are set to make millions of dollars under a new bonus scheme, as the struggling retailer goes to desperate lengths to retain staff.”
“As morale inside Coles plummets over emerging fears about its financial performance, the company has offered 80 of its most senior managers cash bonuses worth 50 per cent of their pay packets. The retailer has guaranteed staff that three-quarters of the promised bonus will be paid if last year’s profit of $787 million is matched.”
“The generous package, which chief executive John Fletcher unveiled to the senior management team on Friday afternoon, is the retailer’s latest attempt to rally staff support as morale slips under the weight of cost-cutting and restructuring. Coles is slashing 2500 jobs elsewhere in the organisation.”
“The (a leaked) report showed comparative store sales – excluding Bi-Lo – gained just 2 per cent to $5.7 billion for the year to November 26. Sales for Bi-Lo were down 1.5 per cent over the same period. The stores are rapidly being converted to the Coles brand.”
“Most of the managers who have been promised bonuses already earn six-figure salaries, with several taking home more than $1 million a year.”
“Last year its top seven earned more than $28 million.”
This news was published in the online version of The Age under the title “Coles throws cash at morale crisis” and was written by Rebecca Urban. Click here to open that page.
It’s amazing how some companies now-a-days compensate their executives. The sums which we read about from time to time are astounding and often they come without comparative gains for the shareholder.
Sometimes I think that some public companies become vehicles that management assails in order to extract from them their own benefit. It’s sometimes not quite that management is there to uphold the best interest of their bosses – the shareholders.
I know I don’t write sweetly about this topic but I don’t think I misrepresent it also.
There are many ways to compensate management. Here are some examples: (a) by providing career progression and meaningful work and recognition; (b) by providing options to be exercised when certain share prices are attained; (c) by providing cash bonuses in addition to existing salaries; (d) by providing tax advantaged benefits as part of an executive’s salary package.
The use of options lately has become quite scandalous. Options are supposed to stimulate an executive to work towards the achievement of a particular share price target and, in part, I believe, they produce that effect. But they do not punish the executive for not achieving its share price target. If the option price is not achieved nothing happens.
Shareholders instead, suffer with failure and underachievement. Shareholders have a downside: they can lose money if management does not perform.
So, I say, why should management be pampered with options – why not turning it responsible with shares. Yes, companies should, not quite offer options, but loans for the purchase of shares.
This way, a manager would think and act, not like a hired gun – but as a business owner, which is the best, most motivating and responsible way for him to think. And the best for shareholders also.
End
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Comment by Anonymous
Comment by Anonymous
Earlier I was to filled up 42 boxes an hour. Now they are demanding 45 boxes an hour. I work in dairy section.
And in the grocery it is now 60 boxes an hour. Though the grocery guys get the load in roll cage now instead of pallet like us. But the fun side is 45 boxes an hour has also a flip side. Previously they used tocount the specials. Now they sometimes dont count the specials. As a result it grew like 50 or sometimes 60 boxes an hour. It helps them in reducing manhour.
I think all the managers are in pressure to increase the sales. Thats why it is happening. Thanks Fernando to bring light to this issue.