May 7, 2008
Shell and BP "Retention Bonuses"
Shell and BP roiled their investors by announcing plans to pay huge, one-time ("one-off") "retention bonuses" to senior executives. They make no sense. A "one-off" retention bonus, once made, will not retain anybody once the bonus is paid. The bonus, to work, has to be paid over time and conditioned on someone staying over time. The Shell bonus is conditioned on staying until 2011, for example, but needs to be paid over time not "up-front." Even in a proper form (in pieces over time), the bonuses should be tied to performance and not unconditional once time in office is clocked in. They are an invitation to grant boondoggles.
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