Sharing The Wealth Corporate Generosity Reaches Record High As Companies Dole Out Millions To Reward Workers

After laboring all last year, multitudes of employees are enjoying manna from corporate heaven in the form of bonuses and other compensation.

A growing number of executives - elated by the strong economy - spread the wealth after some serious belt-tightening in the 1980s and early 1990s, when mass layoffs reigned and the old rust belt industries waned.

Wide-eyed workers in finance, technology, health care and other sectors received bigger paychecks and fatter stock option packages at year’s end.

“It’s been a very nice year for employees - they have good reason to celebrate,” said Margaret Bentson, a compensation consultant at Hewitt Associates in San Francisco. “Their fortunes are linked to the economy and the stock market, and the economy is robust and the stock market is wild.”

In San Francisco, BankAmerica Corp. made like Santa Claus and recently offered generous stock option plans worth millions of dollars to its 85,000-strong work force. Not to be outdone, rival Chase Manhattan Corp. in New York also awarded stock packages to its 67,000 employees.

The securities industry saw record profits of $8.7 billion in 1996, so executives are reveling in huge bonuses. Goldman Sachs & Co., Morgan Stanley Group, J.P. Morgan & Co. and other firms are passing out bonuses 35 to 40 percent higher than the year before.

A managing director on Wall Street may earn $150,000 to $200,000 in salary and up to $3 million or $4 million in cash bonuses, stock and other compensation, according to Joan Zimmerman at GZ Stephens Inc., an executive-search firm in New York.

The most sensational example: Alan (Ace) Greenberg, the chairman of high-flying Bear Stearns & Co., bagged only $200,000 in base salary, but he waltzed home with $16 million in total compensation.

“It’s been an exceptionally joyous time on Wall Street,” Zimmerman said, laughing.

The most inspiring year-end tale so far comes from Kingston Technology, a $2 billion manufacturer of computer hardware and memory chips in Fountain Valley.

During a recent Christmas party, company co-founders David Sun and John Tu told their incredulous workers they would get $100 million in bonuses - an average of $75,000 for the 523 employees.

Companies are devoting more of their payrolls to bonuses and other incentive pay. This past year, 1,700 corporations surveyed by Hewitt Associates said 6 percent of their payrolls went to bonuses and other pay incentives. That’s up from 3.7 percent five years ago.

One curse for workers is that most corporations have abandoned traditional union-style pensions, requiring their employees now to contribute to their retirement plans.

But the blessing is more companies are offering pay plans linked to strong business performance. More than 61 percent have bonus packages for employees, compared to 45 percent five years ago, according to Hewitt Associates.

Not surprisingly, technology firms - at the vanguard of corporate America in innovative workplace practices - also lead in the bonus field. At least 80 percent of software companies offer an incentive plan, reported Bashker Biswas, a director at Cooper & Lybrand’s San Francisco office.

The business tidings of good joy come from a pumped-up economy. After years of a bleak nationwide recession, corporate sales and earnings are up. Unemployment is down. And inflation is stable.

Another big factor: the sizzling job market for top talent in finance and technology is forcing companies to offer lucrative pay plans.

The upshot for wage slaves: Fatter wallets, purses and bank and investment accounts.

Unfortunately, sometimes the holiday good will creates ill will. Bonuses can backfire if not handled well. Many workers automatically expect the extra money as part of their base wages. Neglected employees may get envious. Or managers may not use fair, objective measures in deciding who to reward.

The best new pay plans tie bonuses, stock and other incentives to business performance by individuals, corporate units and the whole company, the compensation experts said.

In a typical profit-sharing plan, workers win big when they meet yearly revenue and profit goals. Other financial carrots may be tossed in, such as an improved market share or a higher return on equity.

If employees meet a minimum “threshold” goal, the year-end bonuses may total 3 percent of payroll. If the workers meet a midrange goal, the bonuses may amount to 5 percent of payroll. For outstanding performance, the payout might hit a maximum of 10 percent of payroll.

“You need to motivate an employee’s behavior with these plans,” said Daniel Ben-ora of Deloitte & Touche L.L.P. in San Francisco.

Take one of Deloitte & Touche’s clients, a global environmental consulting firm in San Francisco called Geomatrix Consulting. With 250 employees and $30 million in revenues, the young, thriving company is growing fast.

But each holiday season, Geomatrix managers and engineers found themselves debating their bonuses. Should all workers - or only shareholders - get cash bonuses and stock? Should it be based on the performance of the whole firm, or business units, or individuals?

For the new pay package, Geomatrix will use a range of performance measures, including team and individual goals, short-term and long-term financial benchmarks, customer satisfaction and several other criteria.

“There was a lot of arm-wrestling going on,” Ben-ora said, “but now they’ve reached a consensus on a plan.”

So how long will cheery executives at Geomatrix and other companies keep playing Kris Kringle?

Crossing her fingers, Bentson at Hewitt Associates predicted: “If the economy and the stock market stay strong, if the performance of companies keeps improving, the payouts will only get better.”