Pay Based on Long-Term Success, Not Short-Term Results: Jeremy Goldstein and the Performance-Based Pay Debate

When it comes to compensation law, nobody knows it better than Jeremy Goldstein. Jeremy L. Goldstein of Jeremy L. Goldstein & Associates has worked for years to find a common ground between employees, management, and owners to determine the best strategy and incentive plans for everyone. Several decades ago, pay was based on the performance of the company, but now this is changing as several corporate analysts are trying to determine whether or not these types of plans actually hurt the long-term progress of the company. That is what Jeremy Goldstein is looking to solve.

 

Performance-based pay plans are those that focus on several factors of company results during the quarter or year and give employees a bonus based on whether or not those results are met. For instance, a plan might combine earnings per share (EPS) and earnings before interest, taxes, depreciation, and amortization (EBITDA), stating that if the company reaches the forecasted EBITDA and EPS, employees will get an extra 50% added to their bonus. In the past, this has been seen as a standard form of incentive. Employees will take ownership and work harder to make sure these things happen. Overall, employee satisfaction is higher when they are working toward an end goal as well, improving efficiency further.

 

However, in recent years these performance-based pay programs have been called into question. EPS and EBITDA are very short-term measures, and a high EPS in one quarter does not necessarily indicate that the company is doing well. Maybe they had one larger order in the quarter where they sold higher-margin products to a single customer. While this does not mean the company will be able to keep up this performance in the future, it does mean that EPS will be higher in just that quarter leading to higher bonuses. Also, executives can change these numbers by simply changing their business strategy. If they want to increase earnings, all they have to do is decrease expenditures, which might mean cutting capital projects that the company needs. Learn more: https://www.resumonk.com/Rf4O8IjkZGGkJ1jqlTIPqA

 

Jeremy Goldstein has found a middle ground that just about everyone can agree on when it comes to these bonuses. He has suggested that companies keep their incentive plans based on performance, but make sure that one of those metrics focus on long-term growth instead of just short-term results. He also suggests that companies should scrutinize the actions of their executives to make sure they are in line with the long-term goals of the company. In that way, companies and employees can find a common ground and get rewarded for their hard work.