The Bonus Culture

Here is an interesting article from the Toronto Star. In a nutshell - the CEO of the Toronto Organizing Committee for the Pan-Am Games, a guy named Ian Troop, is in line for a bonus of $780k if the work his committee is responsible for is completed on time and on budget. He also receives a salary of $390k. Understand, Troop isn't doing the work; he is responsible for others doing it. That's his job.

Troop is getting a bonus if the TOC meets certain criteria - those criteria being the purpose for their existence. He also gets a very healthy salary for exactly the same thing! This could only happen in the CEO club.

Ian Troop is going to get a bonus of nearly a million dollars for doing his job. I understand performance based bonuses. If you work in a field where doing well means you bring in a ton of cash for the people you work for, you should get a share of that. Some people will make that argument for Troop and group. The Games will mean a lot of money for Toronto, the TOC was responsible for them, they should get a share!

The situation is fundamentally different for two reasons. The first is the TOC aren't employees; they are in charge. Troop is the CEO. He isn't making anyone money except himself. The estimates regarding the financial impact of the Games on the city vary wildly (from a loss of hundreds of millions to a gain on the same order). But Troop and the TOC aren't making that money. They are organizing. I don't really know what that means. So it's not like the TOC are being exploited. Second, you give people bonuses to keep them from leaving. After the Games are over, TOC is finished. His bonus for doing a great job would (in a reasonable world) be the ability to negotiate a higher salary at his next job because of the Games success. That's where the (even bigger) pay-off would be. His penalty for screwing up would be the opposite.

Here's another good article about the TOC. You can read it if you want but the best line is, "CFO Barb Anderson, who is paid $307 000 a year, twice billed taxpayers $1.89 for coffee... Mr. Troop expensed $8,561.19 for a Mexican hotel and cocktail party." Troop also expenses tiny items, 91 cents once for a parking spot once.

The culture of bonuses, this system of the rich throwing money at each other is completely mysterious to me. I don't know how they get away with it. Where Ms. Anderson got a coffee for $1.89 is also a mystery. And where in the hell do you park for 91 cents?

What I'm really waiting for is, after the financial impact of the Games is calculated (and they figure Toronto lost $1 billion), there are going to be a rash of stories about rampant corruption in the newspapers. The TOC has this $7 million package just waiting for them, does anyone really think they aren't greasing palms in expectation of getting their hands on it? In the unlikely event the TOC are as clean as pure water, as virtuous as can be, it is not at all difficult to understand how the bonus culture practically guarantees corruption.