Salary Bonus for RCI employees

[JLMoran]

Matt just shared a link about a reward being given to all RCI employees, excluding the corporate officers. At first, this sounds great -- company has doubled its earnings per share as well as doubling return on investments, and as a thank-you to the employees they are being given a 5% salary bonus.

But then I read this further, and I'm less impressed. This isn't a cash bonus the employees are getting now and can use for paying bills, maying saving for education for themselves or their kids, or just putting into a bank account. They're all getting stock shares equivalent to 5% of their salaries. At a current price of $132 per share, employees making between 30 and 60k are going to get a whopping 11 to 22 shares. The price would have to grow a lot to make holding on to that small a holding remotely worthwhile.

Not only that, the shares don't even vest (actually become owned by the employees) for three years. If a particular employee leaves before that three year period, the shares (or at least a portion of them, if the vesting is partial with each year completed) are gone. So the employees have to potentially stick around for longer (maybe a lot longer) than they planned to if they want to actually see that "bonus", and if anything negative happens to the share price in the meantime, they have to suffer the loss in value.

I've worked in the financial industry for over 20 years now, and I have to say that I personally find vested stock "bonuses", mandatory employee stock purchase plans, and the like to be the absolute worst form of compensation to give the average employee. It's hard enough when you start at a company and find out that the employer match on your 401(k) plan isn't really yours unless you stay employed with them for a full five years (although you usually get 20% of the total each year until the 5-year mark). But to then be given a "bonus" that you can't do anything with for 3 years?

That kind of compensation is supposed to be for C-suite execs, where you really do want to give an incentive for them to keep on with the company; make sure the company as a whole does well, not just their already-loaded bank account; and not just run the company into the ground and then use their golden parachute. Regular day-to-day workers should simply be paid cash, as it's the most useful for them and absolutely the most appreciated. Or at a minimum, give the employees the choice of taking cash or the stock shares, where they can think about it make an informed decision.

K, I've said my piece. What do you all think?

[JLMoran]

Just realized this is better suited to the "Royal Caribbean News and Rumors" forum rather than general discussion. @Matt / @DocLC, any chance one of you can move this over there?

[ellcee]

4 minutes ago, JLMoran said:

Not only that, the shares don't even vest (actually become owned by the employees) for three years.

Normal in my industry. 1-3 years.

 

5 minutes ago, JLMoran said:

mandatory employee stock purchase plans,

Are we sure the employees have to purchase anything?- as in, does it come out of their pocket? Or is it just that they have no choice. Don't get me wrong - I'd rather a cash bonus but this is the norm in my industry.

 

While it doesn't seem to be the best - free money is free money and it's a way to make the employee stay in the company - an incentive. If my company does extra it'll come to us through our 401k. I think I'm okay with this.  I get it's not ideal but I think I'm looking at it from a different perspective since it seems very normal in the two major companies I've worked in my adult life.

[Matt]

Like it's @ellcee said, it's free money.  Not the same as a one-time bonus in your pay check, but stock ownership does have opportunity for the value of the bonus to actually increase.  

[JLMoran]

24 minutes ago, ellcee said:

 

34 minutes ago, JLMoran said:

mandatory employee stock purchase plans,

Are we sure the employees have to purchase anything?- as in, does it come out of their pocket? Or is it just that they have no choice. Don't get me wrong - I'd rather a cash bonus but this is the norm in my industry.

I was using mandatory ESPPs just as a general example of "compensation" policies that I find objectionable. This particular reward being given to RCI employees is purely in the form of directly rewarded shares that they will earn after the 3 year vesting period.

It could be I'm missing a key piece here. If this is in addition to some regular cash bonus the employees already get, then I'm a little more on board with this. If this is their only "bonus" for the year and they see nothing else on top of their regular salary, that's where I have a major problem.

28 minutes ago, ellcee said:

While it doesn't seem to be the best - free money is free money and it's a way to make the employee stay in the company - an incentive.

It's only free money if the employee is able to stay. What if that employee was working at RCI to pay for college and this was the year they were starting or maybe returning to school after a year on leave, having already submitted their acceptance notice? No bonus for that person! Or a member of the entertainment staff who suffered an injury that ended their career and they have to leave the ship to retrain in something new? Nothing for them either!

I know, I'm making some very specific, semi-contrived examples. But they're real-world possibilities and such employees would not be at all happy if that was their only source of "bonus" income, now lost.

[ellcee]

I 100% get where you're coming from but this is my reality.

[Matt]

Remember, this bonus is a result of company wide efforts to help the stock price.  The Double-Double program was created to double earnings per share and recording a double-digit return on invested capital.  

Since the program was about the stock price, the return is coming back in stock.

[JLMoran]

1 minute ago, Matt said:

Remember, this bonus is a result of company wide efforts to help the stock price.  The Double-Double program was created to double earnings per share and recording a double-digit return on invested capital.  

Since the program was about the stock price, the return is coming back in stock.

I understand. And I'll admit that there is some personal baggage that is very much coloring my view on this. Will leave it at that.

[twangster]

I got a $100 gift card one year from a company.  I'd rather have this stock deal even with restrictions. 

There's two sides to it.  If they just gave cash away to employees there are lots of investors that would not be pleased, possibly preferring that money be used in other ways.  They could do nothing or throw a one time party.  I see this as a win-win.  Employees get rewarded for their contribution to the goal, get something lasting even if it is just a handful of shares and now have a sense of ownership.  

[Cez]

I guess it also depends on their definition of "salary" - does it include gratuities that they are receiving or just bare basic salary

[Guest toodle68]

This is pretty normal at many companies.  It can make it very hard to leave once you have been there for 3 years (assuming you get this stock every year). It can also result in huge bonus as one year our stock price went up a lot and our $40 stock was sold at $70.  For good or bad, when you tie associates bonuses with company performance, it does result in more vested and engaged employees.

The problem with some of these programs though is how they measure success. You can have a great year, but miss targets, and then no one gets anything.

[jticarruthers]

I lean towards the side of this being a poor way to reward the employees.

Stock options are a great handcuff tool, they feel like a reward but they obligate you to stick around to get any value from the reward. With the "execs" sure, utilize the options and reward them that way. If you are trying to reward the "little guys" (you know the ones that needed to have a big raise in their mandatory gratuities in order to make ends meet) ... then cash now feels like a whole lot better way of doing it.

IIRC most of the worker bees are on contracts that are less than 1 year in length and subject to constant renewal ... putting someone in that type of employment in the situation of having to stick around for 3 years vs handing them a bonus check is not optimal ... kind of like the Future Cruise Credits that get handed out though .. it sounds good at the time but only helps you if you have the money and interest to do another cruise ;)

[RestingBird]

I tend to agree with @JLMoran and @jticarruthers (I was thinking the same thing with the contracts).  I don't trust the stock market to begin with, so I'd rather have the cash for some home improvements, or a RC cruise.

I do like the fact that RC is giving something extra to the employees.  Not many companies do that anymore.

[bobroo]

<exhales> OK, after three days of wanting to respond to this I think I can calmly get this down and not sound like a raging lunatic.

JLMoran is exactly correct, this is hardly a Oh Wow! deal for the employees and poor policy by RCL; although I believe for some different reasons than JL has written.

 

 

Nope.....I'm still ranting.

Lemme give it some more time.