Keeping the bonus all in the family

IT has been dismissed as the stuff of urban legend; judged too bizarre to be true even by New York standards. But there’s a very good chance it is authentic, because in the context of the tribe that is reputed to practise this bizarre custom, it makes absolute sense.

A New York-based anthropologist spilt the beans recently on a practice she claims is fairly widespread among families on the Upper East Side. That is the part of New York that is home to many of the enormously well-remunerated executives who run the world’s wealthiest financial institutions. The Upper East Side is probably the wealthiest corner of the world, home to a large chunk of the 0.01 percenters who own most of the US and world’s wealth.

Writing recently for The New York Times, anthropologist Wednesday Martin claims that many of the wives in this high-powered tribe are rewarded on the basis of a bonus system that has echoes of the sort of scheme that made their husbands so eye-wateringly wealthy. As with their husbands, there is big money involved in these bonuses.

According to Martin, the women of this tribe, whom she calls Glam SAHMs (glamorous stay-at-homemoms) represent the ultimate trophy wife. They have degrees from the US’s top universities, devote most of their waking hours to household duties and their two or three children, and much of the remainder grooming themselves to ensure they always look 10 years younger.

The Glam SAHMs would often refer to what they intended to buy with their “year-end bonus”: usually clothes or perhaps a “table” at a glamorous philanthropic event. As far as Martin could make out, the size of a “wife bonus”, which provides a certain amount of financial independence, is based on how well the wife managed things such as the home budget or whether the children got into a good school.

Amazingly, Martin’s piece has been met with a mix of distaste and disbelief. In a tongue-incheek piece, the Financial Times suggests the concept of “wife bonus” demeans the economic gains made by women in the past 100 years “and corrodes the romantic bonds between partners”.

In reality, the only surprising thing about the “wife bonus” is that it’s not far more widespread. Of course, it might be a common practice, but has been kept under wraps until now.

On the grounds that what is “good for the gander is good for the goose”, it seems inevitable that wives of those exceptionally well-remunerated executives around the globe should be involved in some form of bonus payment scheme. (The tables would be turned on the rare occasions that the big earner is the wife and not the husband.)

The purists among us might argue that it is impossible to design a performance-related pay scheme that: (a) accurately and holistically measures performance in a way that reflects the nuanced and multifaceted role of a mother and wife; and (b) does so over a period that mirrors the impact of her decisions on the family. They might also argue that a mother’s role has too much intrinsic value to be swayed by crass extrinsic incentives.

But they should know that the very same arguments have been made in relation to the executive bonus system. Executives, and the remuneration industry that nurtures them, have resolutely ignored these arguments. They prefer to assume it is appropriate and accurate to use similarly crude performance measurements to justify ever-increasing levels of pay.

Husbands who believe that the bonus system they benefit from is largely responsible for increases in their company’s share price must inevitably believe that the same sort of system — the “wife bonus” — will secure great outcomes for their family. In fact, if they are not implementing this system at home, they need to explain to their remuneration committee and shareholders why not.

Of course, there is the issue of who sets the “wife bonus” targets and measures performance at the end of each reporting period. Should this be done in conjunction with the children and the mother-in-law?

And how do you ensure the wife doesn’t game the system while raising sociopaths?