Manufacturing

Kodak Bonuses Are a Bad Move


The Eastman Kodak booth during the 2012 International Consumer Electronics Show (CES) in Las Vegas.

Photograph by Daniel Acker/Bloomberg

The Eastman Kodak booth during the 2012 International Consumer Electronics Show (CES) in Las Vegas.

On Friday, Eastman Kodak (EKDKQ) asked the U.S. Bankruptcy Court for permission to pay out $13.5 million in “stay” bonuses to 300 of its top managers so they don’t quit during the reorganization. This latest request is a sure sign that the company simply doesn’t get it—and that any possible turnaround is doomed.

Saving Kodak will require radical change. Giving out bonuses to keep intact a management team that has already failed will make real change much more difficult. There are always key employees you don’t want to see leave in these situations, but Kodak’s legacy film business was almost completely replaced by competitors in digital imaging, and revenues dropped by more than 50 percent in the past five years, sending the company into Chapter 11.

What Kodak needs is a new sense of vision (perhaps from different leadership), and a management team that is motivated by that vision—not one that is sticking around just because they’re getting a bonus.

When Steve Jobs became chief executive officer of Apple Computer (AAPL) in 1997, the company was on the verge of bankruptcy and many talented employees had left. But Jobs quickly created a new vision for Apple and rallied the remaining managers to support it. The Apple team he built was motivated to be part of an exciting new vision and share in its future upside. They weren’t there just to collect short-term “stay” bonuses. This was a key factor in the company’s success the past 10 years.

While it is easy to criticize Kodak, many large U.S. companies today are not growing at meaningful rates even as annual bonus money continues to flow to retain the existing team vs. rewarding real growth.

Kodak—and many other corporate boards—would better serve their shareholders by eliminating this “retention bonus” mentality and starting to create more meaningful rewards that focus on real long-term growth.

Larry_popelka
Larry Popelka is founder and chief executive officer of GameChanger, an innovation consulting firm.

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