Gaines Company Ethics Officer Case Summary

As the Gaines Company ethics officer, I would make several suggestions on how to compensate managers in a way that discourages gamesmanship. If a change in the current program was not desired, then I would make suggestions to make the current compensation program less susceptible to gamesmanship. For example, I would suggest stressing to the employees how important it is to the business to provide accurate forecasting. If you continue to see forecasted numbers on investments that you believe are being under forecasted you can begin to track the forecasts and actual earnings. By tracking these forecasts and the actual earnings you could use them to create a graphical representation of the inaccuracy or possibly to point out issues with the performance
of an employee that continuously under forecasts. I would also suggest the option of eliminating the current bonus program and introducing one that will motivate employees to meet company goals with a bonus tied to their performance evaluation. For example, If Gaines Company set a goal to receive an average of 10% return on all investments made for the year, and anything over the 10% return the company would share the profit with all the employees, but it would be based on their individual performance reviews. If an employee was above average they would receive 100% of the eligible amount, an average employee would receive 75%, a below average employee would receive 50%, and an employee that needs improvement would receive 25%. Awarding profit shares of the returns over the 10% based on the individual’s performance review should help prevent under forecasting because if they practice this it could bring their appraisal down and it would not benefit them. It would be in the employee's best interest not to participate in gamesmanship, to follow policies and procedures, and to do the best they can to outperform so they can get the full benefit.