Bonus Babies

Profitability has its rewards

The 950 employees of Shaklee, a San Francisco health-food manufacturer, stood and applauded early this month when they heard about their upcoming Christmas presents. Chairman J. Gary Shansby announced that the year-end bonuses would be boosted from the 5.5% of their salaries that was paid last year to 12%. Said Personnel Director Al Cotton: "They were ecstatic."

Many U.S. companies have been giving out similar good news in recent weeks. Following three years of recession, bonuses are back with a bang. After-tax corporate profits in 1983 will reach some $130 billion, an increase of almost 14% from 1982, and many firms are passing along the good times in the form of higher bonuses. About 60% of the corporations surveyed by Prentice-Hall publishers plan this year to give some type of year-end premium, ranging from cash to food baskets. About one-third of the companies will give a bigger present than last year.

At some firms, the bonuses are surprisingly sweeping and generous. The Chicago-based Leo Burnett advertising agency gave all 1,600 of its U.S. employees a "profit-participation cash bonus." Said one Burnett executive: "It was a good deal better than last year's. I haven't detected a single sign of disappointment." At Silicon Valley's Hewlett-Packard, supervisors ceremoniously handed out checks to 62,500 employees for two weeks' extra pay, just in time for Christmas shopping. To qualify, employees needed at least six months on the job. The total bonus came to $49 million, up slightly from last year. Said Spokeswoman Karen Jervais: "Keeping costs down and profits up means bigger bonuses. If employees work really hard, they are going to share in the success of the company."

Some of the most bountiful bonuses are on Wall Street, where investment companies this year reaped record earnings from another bull market in stocks. At the Drexel Burnham Lambert brokerage firm, executive officers can earn bonuses equal to as much as three years' salary. Other employees, with at least ten years on the job, are entitled to a gift of up to 20 weeks' pay. Last year the maximum was 13 weeks' worth. Even employees who have been with the company only six months are eligible for up to three weeks' extra wages. "Everybody from the janitor to the chairman receives them," says Drexel Chairman Robert Linton. "We want to spread the wealth around."

Detroit automakers did not have bonuses under their Christmas trees, but big ones are on the way. Beginning this spring, the Big Three automakers will give executives their first bonus checks since 1979. General Motors, Ford and Chrysler expect record total profits of about $6.5 billion in 1983, a more than 13-fold increase from $475 million in 1982. At present, many auto executives are taking home less than they earned five years ago. GM Chairman Roger Smith, for example, made $548,634 last year, compared with a salary of $240,000 and a bonus of $590,000 in 1978, when he was an executive vice president. But in early spring, Smith is likely to be the first GM executive in history to break the $1 million barrier in salary and bonus. GM's compensation committee will have more than $100 million in 1983 bonuses to divide among 5,000 executives.

Despite the general trend to more year-end payoffs, some firms have cut back because they feel strapped by lingering effects of the recession. San Diego-based Pacific Southwest Airlines canceled its annual Christmas time circus-in-a-hangar this year as an austerity measure. Instead, the airline distributed $15 gift certificates that could be used to purchase a turkey.

Many large firms like Shearson/American Express have rejected holiday gift giving as condescending and unrelated to job performance. They prefer to reward workers with larger salaries or with profit-sharing plans. But the tradition thrives at companies where managers carry on a more personal relationship with workers. Says Los Angeles Management Consultant Louis Howe: "At small companies, where there continues to be a close identification between employer and employees, the Christmas bonus never went out of favor."

The gifts come in many packages. The Northrop aviation firm lets its 24,000 California workers have two weeks off with pay. New York City's Apple Bank gave its 540 workers cash bonuses that were 7% bigger than last year's and distributed baskets, each containing a turkey, ham, cheese, candy and other treats. In a survey of 425 companies by the Washington-based Bureau of National Affairs, half of the firms said they were throwing Christmas parties, up from about 40% last year. At a holiday bash sponsored by the Gerber baby-food firm in Fremont, Mich., a magician provided entertainment and the company Santa Claus helped give out more than 1,000 toys to children of employees.

Last year, even with the economy sagging, Toys R Us Chairman Charles Lazarus won a bonus of $1.1 million on top of his $315,000 salary. Norman Ricken, the president of the New Jersey-based chain, got a check for $320,000. With this Christmas season's riotous demand for products ranging from Cabbage Patch dolls to Return of the Jedi action figures, Toys R Us executives can probably count on bonuses that will buy plenty of grownup playthings.