Whatnot At Work

Executive Pay Disclosure

The Securities and Exchange Commission has just adopted a new rule requiring companies to disclose the compensation of highly paid employees. Previously companies only had to disclose compensation for executive officers of the company. The new rule covers employees with executive responsibilities in some part of the company.

Obesity Costs More For Companies

A new study shows that health care costs and prescription drug costs increase as employees become more overweight. The body mass index (BMI) is a measure of weight to height. A BMI of 25 or more signifies overweight, a BMI of 30 or more signifies obesity.

The study of 35,000 employees and spouses shows:

• Medical care costs per individual rise $120 (4%) for each point above a BMI of 25.
• Prescription drug care costs per individual rise $83 (7%) for each point above a BMI of 25.

For a person with a BMI of 35, medical costs were nearly $600 higher and drug costs $413 higher than for a person with a BMI of 30.

Now might be a good time to look at beefing up your corporate wellness and exercise programs.

Steps To Wealth

MoneySense magazine compiled a list of the top 25 money tips. They include a lot of expected good wisdom: setting financial goals, having a long term perspective, diversifying, and avoiding debt, especially credit card debt. Six of the more interesting tips:

1. Use money as a tool to live the life you want.
2. Spend wisely - Focusing on how you spend is more valuable financially than focusing on how to invest.
3. Love what you do, otherwise find what you love and work in it. It is cheaper to work your dream job at a low salary than it is to work a miserable high paying job so that you can pay for what you love to do. From the article:

   "Say you can earn $35,000 a year following your bliss making stained glass, for instance, or working as a fishing guide. That's equivalent to the annual income you could expect to generate from a $700,000 portfolio of stocks and bonds."

4. Pay attention to your health at least as much as your finances. Your health becomes more important as you get older and more expensive to maintain if you make the wrong choices early.
5. View financial planning as the benefits and rewards of being able to spend on the things that you decide are most important, rather than focusing on all the things you are giving up. When you focus on the positive results of budgeting, you have a better chance of sticking to your plan.
6. Consider doing it yourself. When you look at how much take home pay you have to make to pay for a service, instead of just the list price, doing it yourself becomes much more attractive. From the article:

   "Say someone offers to paint your house for $1,000. By the time you include various levels of sales taxes, you're probably paying close to $1,150. Then you have to factor in how much income you need to pay that sum. Assuming you're in the top tax bracket, you will need to earn an additional $2,100 or so to generate the money required after tax to pay the $1,150 painter's bill."

Pixels For Sale IRL

A company in the Netherlands is selling "pixels" on its office building for 19.99 Euros/month. Duplicating the idea of the million dollar home page in real life to create the million dollar facade.

Salary Increase

Pay raises are expected to average 3.5% in 2006 and in 2007. This is the fourth year in a row that pay increases have held below 4.0%. Here are the details by industry (pdf).

What you can do to maximize your pay raise.

Why Bonuses Work

Contrary to marketing guru Seth Godin's opinion that bonuses don't motivate, there are many situations where bonuses are exactly the right tool for motivation. Seth states:

"But once people have joined your team, incremental money--bonuses and the like--usually demotivate people. They demotivate because sooner or later, people feel as though they're being treated unfairly."

Handing out bonuses work well for motivation in the following conditions:

1. When they are based on merit or achievement and are delivered to the individuals or teams responsible for the achievement. This provides the top performers with something every employee desires: appreciation.
2. When they are based on financial events, like a good quarter, and they are handed out to the entire company. This provides all employees a sense of being part of a team and part of company that is fair and willing to share the company's success with those that made it possible. Again it comes down to giving employees a feeling of appreciation.
3. When they are used as a bridge across red-tape to bring underpaid employees closer to market pay rates. Sometimes it is easier for managers and HR to get authorization for a one time bonus than a large raise - especially when pay raises are capped below what is needed. Not only does this kind of bonus alleviate the pay disparity, but it shows the employee that their manager will do what it takes to treat them right.
4. When they are used as short term fixes for bizarre market conditions. When the market conditions change, the company is not locked into a permanent pay disparity. In the crazy market of the late 90's, companies were better off paying bonuses to hire and retain highly sought employees than to lock in huge salaries that were unsustainable and then required the resulting layoffs to fix.

Salary increases, as soon as they are delivered, become entitlements. Bonuses do not, and so retain their ability to keep on motivating, retaining and showing appreciation to your valued employees.

I wrote an article about steps to maximize your next pay raise here.

Executive Stock Option Backdating Scam

Companies are getting into trouble because executives are backdating their stock option grants. Backdating is when executives pick the lowest point in the year for stock option grants to themselves. This gives them instant profit. It is illegal when it is not disclosed and many company executives have been doing it for several years.

Here's a research study that started the investigations: Backdating of Executive Stock Options.

"Backdating allows executives to choose a past date when the market price was particularly low, thereby inflating the value of the options."

Several new companies have been added to the list of those under investigation, including Monster.com and Cyberonics.

"Already, 15 senior executives or directors — including four CEOs, four finance chiefs and three general counsels — have been fired or have stepped down at seven companies."

A variant on this scam is granting just before announcing good news, to insure that the stock rises after the grant:  Granting Ahead of Good News.

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