Give it back!

Hard times require tough decisions. Banal, I know, but true nevertheless. The media are full of the latest corporate strategies aimed at finding ways out of the economic crisis.

Most of these strategies are fairly unimaginative. They involve cutting production, cutting costs and cutting staff levels.

Two people with whom Business Spotlight works — one an author, the other a photographer — said the same thing to me this week about the way companies are reacting to the recession. Firms, they told me, are using the downturn as an excuse to force through unpopular decisions.

Neither person would claim to be an expert in business. But both are highly intelligent and it is hard to argue with their analysis. One emphasized that he is "not an opponent of capitalism", but that the current system of incentives is "all wrong" and encourages short-term thinking.

In a nutshell, his argument was this: top managers are highly paid and generously rewarded in good times. They take both the money and the credit for success. But when things go wrong, the managers don't suffer.

Instead, it's the staff at lower levels who see their jobs cut. Unpopular rationalization and restructuring are pushed through. Employees are told this is essential for the company's long-term success.

For those who lose their jobs, this is of little comfort. For those who stay, there is increased uncertainty. Meanwhile, the top managers are rewarded for making the companies financially viable — at least until the next crisis, when the whole procedure starts again.

But aren't we being unfair to the top managers? When things go badly, and the restructuring fails, they lose their jobs, don't they? Well, sometimes they do. But it doesn't usually take them long to find another one on the management carousel.

I remember first reading about this phenomenon 30 years ago at university. Nothing has changed. And it's not necessarily a bad thing. It would be a waste of management talent if these people didn't get new jobs.

Or would it? I suggested to our photographer that managers who fail should perhaps be banned from working for three years. Stupid idea, the photographer replied. The top managers get paid so much that they could easily afford a three-year hoiday. Better, he said, would be to make them hand back their last three years' salaries, bonuses, etc.

Totally impracticable, no doubt. The only people who would gain would be lawyers arguing over the definition of "failure". But I still found the idea very interesting. One of the problems of the current system is that the price of management failure is so low. And that's what most people can't accept.