BMW will tie executive compensation to the pay for blue-collar employees

A very interesting article just popped up on BusinessWeek and judging by the reaction around the web, BMW AG scores some PR points.

“BMW (BMWG.DE) became the first major blue chip German company to link the bonuses of its top managers to those of its assembly line workers, amid growing global criticism of executive compensation. The move sends a strong message to other firms also examining their compensation practices, as the world’s largest banks in particular have come under fire from politicians, shareholders and the public over excessive bonuses during one of the worst economic crises the world has seen.

BMW plans to tie executive bonuses to those of its blue-collar workers, in a bid to create a fairer and sustainable compensation environment within the company. Starting in 2010, the company will use a common formula to ascertain and award bonuses to its upper and lower level employees, based on the company’s performance as measured by profit, sales and other factors. That means that upper level management could potentially lose more money than their lower level counterparts for bad performance, BMW said.

A spokesman for BMW said the company’s goal was to create fair and transparent compensation practices and to prevent a gap between management and the workers, as the under class, from developing. “We don’t just want to build sustainable cars. We also want to have sustainable personnel politics. We think this is good for the company culture,” the spokesman told SPIEGEL ONLINE. He declined to be more specific on how the formula will work.”

Full Article on BusinessWeek

4 Responses to “BMW will tie executive compensation to the pay for blue-collar employees”

Tom says:

October 28, 2009 at 5:59 am

It’s a start.

Brookside says:

October 28, 2009 at 12:23 pm

Exactly, “It’s a start,” and it’s a good one. When everyone in a large corporation knows that their income is based on an equal formula…from the CEO to the people on the assembly lines… the policy will promote a climate of team work
and the perception of fairness.
Way to go BMW.

The Lee says:

October 28, 2009 at 12:57 pm

The fact that more companies don’t have this policy in place frustrates me.

Bonuses should be “feast of famine”. If the line workers and support staff aren’t eating, then neither should the executives. If the executives are getting bonus money thrown at them, the line workers should as well. It’s only fair, IMO, especially since the executives can’t turn a profit for the company without relying on the hourly employees to carry their weight.

Like it or not, executives a company do not make. Without the lower level folks that actually make and ship the cars, BMW would simply be a social club with a few board members meeting on occasion to discuss things they aren’t doing.

- Doug says:
  
  October 28, 2009 at 5:40 pm
  
  Yeah, how have they evaded such an obvious pay strategy for so long?