So Much for a Transparent Executive Bonus Formula

Lora Bentley

Given the fury in Washington, D.C., over the news that AIG has "no choice" but to pay its executives $165 million in bonuses, I found Matthew Boyle's post in BusinessWeek's Management IQ blog on Friday quite interesting. He is absolutely right.

 

Boyle points to a February Securities and Exchange Commission filing in which Coca-Cola's board of directors states that, from 2008 on, the company's executive bonuses will be awarded on a discretionary basis only, rather than according to a specific formula. Despite the fact that the SEC requires registered companies to reveal their bonus formula, Coca-Cola says doing so would give its competitors insight into its business strategy. The company is willing to take the hit.

 

Boyle's response? "What hogwash." Especially in today's climate, where transparency and accountability are prime concerns, "investors need to know what those bonuses are based on," he says, citing The Corporate Library's Nell Minow.

 

Perhaps a reader called BCR sums it up best in a comment on the post. BCR says:

I'm not a stock holder of Coke, so I don't really care. If I were, I would want to see the bonus structure. Public held companies have that responsibility to their owners.


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