Some good from bank bonuses?

Lawmakers, taxpayers and even some in the financial industry are railing against the huge executive bonuses handed out by Goldman Sachs and JPMorgan Chase and other companies that, less than a year ago, received billion-dollar handouts from the federal government.

But is it possible these bankers are setting a good example?

Chris Farrell, economics correspondent for MPR and Marketplace, recently made the case on Marketplace Morning Report. Profits earned by the banks should be viewed as “disgusting, because they have been made off of the taxpayer” Farrell said. But when it comes to the bonuses, Farrell said: “I wish more companies would pay out 40, 50 percent of their revenue to their employees during the good times.”

He added that while more companies should take the bankers’ cue and share more of the profits, he doubts that will happen because the economy is still struggling. (Listen to Farrell’s comments on Marketplace’s Morning Report below. Go to the 4:20 mark of the clip).

But you have to wonder if the bad press around banking bonuses could cause other companies to shun them altogether?

Ron Kirscht, a manufacturer in our Public Insight Network, said he’s actually a bigger fan of bonuses than before the recession.

Kirscht is the president of Donnelly Custom Manufacturing, an Alexandria firm that employs about 200 people who make machine parts for other manufacturers. And, for the first time in six years, there were no bonuses for Donnelly’s staff.

That’s because last year wasn’t kind to Donnelly. Kirscht said during the first part of the year, business tailed off by as much as 40 percent with some vendors. In March he had to layoff 20 people. Things started to turn around last fall after competing manufactures folded and Donnelly picked up their business. Recently, Kirscht was able to rehire some laid-off workers.

Kirscht says relying more on bonuses as a reward for employees, rather than just raises, may decrease the likelihood of layoffs in the future.

“One thing this downturn showed me is that bonuses create flexibility for when times get rough,” he said.

“If we continue to build on the last few months I think we will return to bonuses.”

Would you rather have a raise instead of a bonus — even if it increased your risk of being laid off? Would you work harder if you knew it could result more profits and a bigger bonus? Give us your take.

Comments are closed.