Bonuses, Anyone?

Alan Johnson is among a small group of behind-the-scenes information brokers who help determine how Wall Street firms distribute billions of dollars to their workers. He operates as a compensation consultant in an obscure corner of the management consulting industry and in the shadows of high finance.

Questions:

1. What was the most interesting thing that you learned in this article?
2. How do this year’s bonuses compare to 2008?
3. What do Wall Street pay packages routinely include? Discuss how these bonus items are accounted for.
4. How does Mr. Johnson research his recommendations?

Source:

Roose, K. (2012).The Invisible Hand Behind Bonuses on Wall Street, The New York Times, Jan. 16 (Retrievable online at http://www.nytimes.com/2012/01/17/business/the-invisible-hand-behind-wall-street-bonuses.html?_r=1&ref=business)

The confused world of outsourcing

India’s outsourcing giants — faced with rising wages at home — have looked for growth opportunities in the United States. But with Washington crimping visas for visiting Indian workers, some companies such as Aegis are slowly hiring workers in North America, where their largest corporate customers are based. In this evolution, outsourcing has come home. At its U.S. sites, Aegis says, 90 percent or more of its workers are American.

Questions:

1.  Using the amounts given in the article (pay runs $12 to $14 an hour with bonus checks of up to $730 a month), use an average per hour amount of $13 per hour plus a bonus of $730 to calculate what a call center’s gross pay would be for an individual who works a 40-hour week.

2.  How would you make the journal entry for the bonus?

3.  According to the article, about 5,000 people work at nine U.S. call centers and Aegis aims to triple its U.S. head count to more than 15,000.  Based on this information:
          a. How many people on average work at each call center in the U.S.?
          b. What percentage increase in workers is anticipated?
          c.  From a managerial accounting perspective, what issues would you be concerned with regarding
               this growth?

Source:

Glader, P. (2011). As Indian Companies Grow in the U.S., Outsourcing Comes Home, The Washington Post, May 20 (Retrievable online at http://www.washingtonpost.com/business/as-indian-companies-grow-in-the-us-outsourcing-comes-home/2011/05/17/AFZbrp7G_story.html?hpid=z2)

The Worst Footnote Disclosures of 2009

Every year, Michelle Leder at www.footnoted.org, takes a look at the worst footnote disclosures that companies try to bury in their routine SEC filings. As her website states, the financial footnotes are important for all users, including professional money managers and analysts, accountants, and individual investors. According to her article, there are a lot of candidates for this distinction, so it is hard to whittle it down to just five.

QUESTIONS:

1. Take a look at Michelle’s entrants in the BNET.com article. Then, after 12/31/09, go to her website (www.footnoted.org) to see who won reader-nominated honor of having the worst disclosure. Do you agree? Why or why not?
2. What is a retention payment?
3. How should the retention payment for Martha Stewart be recorded in journal entry (or entries) form?
4. What is a gross-up?
5. How should a gross-up for Ross Perot Jr. be recorded in journal entry form by the company granting this concession? (For a hint, see http://www.footnoted.org/buried-treasure/perot-gets-a-gross-up/)

SOURCES:
Ritholtz, B. (2009). 2009’s Worst Disclosures Buried in Footnotes, BNET.com, December 21 (Retrievable online at http://www.ritholtz.com/blog/2009/12/2009s-worst-footnote-filings-with-the-sec/)

Leder, Michelle. (2009). Voting now open for worst footnote of 2009! Footnoted.org (Retrievable online at http://www.footnoted.org/)