One response to remove "bonuses" from compensation structure

I think most of us could see this one coming (and it makes sense).

Since the government is going to restrict or eliminate bonuses from companies who have received TARP funds, one company (Citibank) has decided to restructure their compensation so that the bonuses are built in to their base pay. Citibank has received $45 billion from the government so far. It appears the govenment does have a final "veto" of compensation structures before it is implemented.

Here are some of the risks and rewards for Citibank to do this.

• Reward: keep "talented" employees and prevent them from going to other firms where bonuses are not scrutinized (TARP funds already paid off).
• Risk: now if cash flow is tight, the choice won't be whether or not to give the bonuses, but whether or not to keep the employees. If it was a base + bonus structure, the company could opt to cancel bonuses. Now if more is shifted to the base salary, the company will need to play accordingly.

Click here for the full report on Yahoo! Finance