Bonuses come in different flavors. The most common is likely the performance bonus. Other types include hiring, retention, or signing bonuses. Typically, a bonus is paid as an incentive.

Merriam-Webster defines bonus as follows:
Bonus – something in addition to what is expected or strictly due: as a) money or an equivalent given in addition to an employee's usual compensation b) a premium [as of stock] given by a corporation to a purchaser of its securities, to a promoter, or to an employee c) a government payment to war veterans d) a sum in excess of salary given an athlete for signing with a team

The term, entitlement, was not used in Merriam-Webster’s definition. Therefore, I’ve taken liberty in this article to infer that a bonus payment is not an entitlement.

Further, I’d like to offer the possibility of contractually altering the terms of a bonus contract. If both parties sign a modifying agreement, it will modify the initial agreement. I know this can be done, based on my own experience.

The larger-than-life AIG bonuses are offensive, true; however, not all payers of bonuses are of deficit moral character. In the following sections, I contrast three companies bonus practices (and wax a little philosophical along the way).

Headquartered in New York City, American International Group, Inc. (AIG) is one of the largest insurance companies in the United States. At its crest, AIG was the eighteenth largest publicly traded company in the world. As such, AIG enjoyed somewhat over four years enthronement in the DOW 30 index; however, given the revolving door composition of that index, AIG was replaced after its Sep-08 fall from grace.

Subsequent to AIG’s collapse, the U.S. government pumped in more than $170 billion to shore up the floundering institution, reasoning that a financial sector company as large as AIG could not be aloud to fail. It would send shock waves, a potential tsunami, throughout the economy – devastating other already teetering firms.

AIG pledged to use the bailout funds wisely but, first, there was an internal matter of unpaid bonuses.

In Mar-09, AIG announced that they intended to pay $165 million in bonuses to their executive team. But, wait, that’s just the tip of the iceberg. Factor in bonuses for the entire company and the number grows to $1.2 billion.

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AIG management talking amongst themselves, Jan-09: Let’s see, doing the math, our bonuses account for only 0.7% of the total taxpayer bailout funds. Perhaps no one will notice. Even if they do, it’s arguably an immaterial amount. No foul here.

Remember this, guys, the common folk have short memories and are easily distracted. If we don’t bring up that little run-in with the SEC, back in 2006, over those trumped up Securities Fraud Charges, they won’t remember the $1.6 billion settlement or the guilty-plea a couple of our exec-buddies made back then. I mean, it was a measly $2.7 billion misrepresentation of book value. That’s about 3.3% of what we said we were worth. Come on, get real – 3.3% is less than most common folk pay in sales tax. Hardly worth excitement, right? Our super-sized bonuses are even less that that. I promise, guys, no one will even notice our 0.7% bonuses. Trust me.

AIG management talking amongst themselves, Mar-09: Well, who’d a thunk it? Have you ever seen such nerve? Who the hell do these taxpayers think they are? Well, here’s the silver lining: with all the public angst over that “bonus” thingy, the common folk will surely loose sight of the FBI’s ongoing fraud investigation over the collapse in our stock price. That FBI issue will likely float away into the night, unnoticed and unremembered. Come on guys, you’ve got to stay with me on this!

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AIG, a study in the justification of compromised ethics. Imagine working for a management team like this!

President Obama’s stimulus plan promises to put $8.00 a week back into most Americans’ paychecks – kinda’ like the RNC’s 1928 presidential campaign ad promising a chicken in every pot.

Wal-Mart Stores (WMT) is practicing a little one-upmanship on the president. They paid $933.6 million in bonuses to hourly workers, a record increase of 46.7% over last year’s bonus pay out. That equates to approximately $900 per hourly paid employee. Now, that’s nothing to sneeze at! (Unless, of course, you’re an AIG executive!)

A Company spokesman said Wal-Mart paid bonuses to one million of its U.S. workers. Its U.S. work force grew last year by 33,800 employees, to 1.45 million.

The spokesman said, including profit-sharing payments, 401(k) contributions and merchandise discounts, Wal-Mart is giving workers a record $2 billion this year. This is an 11% increase over last year’s $1.8 billion.

Wal-Mart Stores, Inc. is the world’s largest publicly traded corporation, when ranked by revenue. It’s the largest private employer in the world and operates the largest grocery chain in the U.S., controlling an estimated 20% of the retail grocery and consumables business.

Much criticism has been leveled at Wal-Mart over the years on various topics; however, on this issue – providing incentive to the little guy during these tough economic times – Wal-Mart has done the right thing.

Imagine working for a company like that!

Valero Energy Corp (VLO) is a Fortune 500 oil and gas refining company based in San Antonio, Texas. Its 3.3 million barrels of production each day make it the largest refiner in North America. They also own one of the nation’s largest retail gasoline operations, selling fuel under multiple brands including Valero, Diamond Shamrock, and Beacon.

Business is booming at Valero! Bill Klesse, Valero’s CEO earned a bonus of more than $700,000. What did he do with it? He gave it to his employees!

Klesse instructed payroll to distribute his $700,000 bonus among Valero’s hourly employees in $50 increments. What a guy!

In visiting the Valero website, we read: Employees are our number-one asset. We strive to provide employees with the best compensation and benefits in the industry. Bill Klesse walks that talk.

The hourly employees who received this bonus will not soon forget the generous gesture of their top man. True generosity – an executive giving up a large portion his income to insure his employees are properly appreciated in these trying economic times. That kind of generosity cements loyalty. It inspires an extra-mile effort. It breeds like-mindedness in the rank-and-file. It builds strong teams. Bill Klesse leads by example.

Imagine working for a company like that!