By CYRIL TUOHY is managing editor of Risk & Insurance®
It doesn't take a rocket scientist (or a risk manager) to see that the economy is hurting. The past two years have been one ugly journey, what with the exploding number of unemployed workers, the precipitous drop in industrial production and the evaporation of property values.
The latest unemployment numbers, issued June 6 by the U.S. Dept. of Labor, show the unemployment rate climbing to 10 percent, more than double what it was just two years ago.
No company drove home the sickly state of the economy better than did General Motors, once the gold standard in American manufacturing. The behemoth declared bankruptcy June 1.
These are difficult times. Lean times demand sacrifice, not bonuses, especially not at companies on life support surviving only thanks to the goodwill of taxpayers. Given these circumstances, it's worth asking the question: Where do some of the industry's risk executives get off thinking they deserve higher bonuses than they got last year?let alone any bonus at all?
A spring 2009 survey of 512 U.K.-based risk professionals by GRS Group, an international executive search consultancy, found that 56 percent of the respondents expected to receive a bonus this year, down from 67 percent of risk professionals surveyed last fall, who said they expected to get a bonus.
Less than 3 percent of risk professionals expect their bonus to double, according to the spring survey. That was down significantly from the 12 percent of risk professionals surveyed in the fall who believed that their bonuses would double.
"Even the higher fliers have had to accept the new landscape," said GRS consultant David Butters.
While it's encouraging to see that risk experts, in tune with the zeitgeist, have at least ratcheted down their bonus expectations, anyone's got a lot of nerve if they think they still deserve a bonus in this economy.
The GRS survey revealed that some risk experts aren't shy about looking out for their own interests. In addition to the 3 percent of respondents who expected a bonus double or more the size of their bonus last year, 4 percent of the respondents said they expected a "much higher" bonus, and 9 percent said they expected a "slightly higher" bonus compared with the previous year.
If risk managers were doing their jobs in the first place, perhaps the economy wouldn't be in the sorry state it's in. Where was risk management at AIG when policyholders and stockholders needed it?
What about at all the bond insurers who've had to file for Chapter 11? Where was risk management for those companies? Where was the risk management at Citibank? At Chrysler? At Circuit City? At Smith Family Homes, a mid- to upscale Tampa-based residential builder that went belly up last year?
If risk managers were doing their jobs, how is it that so many companies are in trouble? The stock market has lost trillions of dollars in value in just 18 months, wiping out the gains made over the past five years.
... and some of these people believe they deserve a raise? I don't think so.
It's the role of risk management to prevent companies from going through the nasty upheavals symptomatic of this recession. Many risk managers, it should also be noted, get paid handsomely for their service. Any risk expert thinking he or she deserves a bonus this year ought to have his or her head examined.
Here's a better and cheaper idea, and it's guaranteed to find a sympathetic audience in this economy. CFOs can look their risk managers in the eye and tell them to kiss their bonus good-bye. If risk managers don't like it, CFOs can tell them they're welcome to find work elsewhere.
In this economy, I'll wager that any Fortune 500 employer can pick up two risk experts for the price of what one risk manager used to command.
(Read Senior Editor Matthew Brodsky's opposing viewpoint on risk manager compensation.)
July 1, 2009
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