Originally Published PR Week December 11, 2009

Most companies are not paying out big bonuses this year, if they're paying anything at all. Exacerbating the situation is that many employees saw their salaries frozen during 2009. They're anxious, to say the least.

So how do managers throughout the company have conversations with employees as the year comes to a close?

Here are some thoughts:

First, don't duck the discussions. Employee anxiety only gets worse in the absence of credible information. You and your people must fill the void. No discussion is the worst possible scenario.

Second, the primary concern of many employees today is job security –

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It’s that time of year when many publicly held companies are getting out their proxy statements.

This year, the springtime ritual is complicated by last year’s sickening plunge in stock prices. Many companies find themselves sending proxies to anguished investors who lost retirement savings, employees who lost 401k plans and maybe even their jobs, and skeptical media people eager to find the next AIG-like bonus scandal.

Are you ready to explain to these people why the CEO is getting his multimillion dollar compensation package?

If you’re in corporate communications or investor relations for those firms, your task may be further complicated by the fact that the boss’s compensation probably isn’t primarily in the form of salary. Valuing restricted stock and stock options is governed by arcane SEC and FASB accounting rules that may result in proxy disclosures that bear little resemblance to current market values.

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This past week, it seems as though everyone in America from the president on down has a strong opinion about those AIG, Merrill Lynch, and Fannie Mae bonuses. “Outrage” has become the word du jour.

The public’s furor over AIG and the others will subside. But enhanced scrutiny of executive compensation, by regulators and shareholders, may not – even for companies that aren’t imploding or finding the federal government as their biggest shareholder. Fed Chairman Ben Bernanke is urging companies to align executive incentives with corporate goals, and avoid “mismatches between the rewards and risks borne by institutions or their managers.” And Simon Johnson, a professor at MIT’s Sloan School of Management and former chief economist of the International Monetary Fund recently wrote that “offering guaranteed [retention] bonuses to virtually the entire operation is hardly the way to achieve the desired results. We should not let people think that the best way to guarantee job security is to lose lots of money in a really complicated way.”

Smart boards and CEOs, rather than hunkering down

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Originally Published PR Week

Many companies are in a predicament right now. Their financial performance during the first half of the year was fairly strong and, as such, their full-year numbers are good enough to provide bonuses to key staff members who performed well.

But the second half of the year, especially the fourth quarter, has been terrible, with signs that things will only get worse in 2009. In an environment of staff and budget cuts, how can a company also pay out bonuses?

This dilemma raises two questions, one financial, and the other moral. First, is it financially prudent to pay out bonuses, even if “earned” in 2008, when 2009 has the potential to be a financial disaster?

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