Thursday, June 20, 2013

IMHO, Evidence that Legislators Need Real World Experience

I am going to warn you that this is going to sound like a political statement, but it's not. And, for full disclosure, while I have never worked for the IRS or any other part of the Department of Treasury or any other governmental agency (save for a short period of time at a public university), I do have friends who work for the IRS.

Trey Gowdy (R-SC) is a Representative from the State of South Carolina. According to his Wikipedia page and his Congressional website, Mr. Gowdy is a 1989 graduate of the University of South Carolina School of Law where he was a member of a scholastic honor society. He then clerked for several judges and went into private practice briefly before becoming a prosecutor and then solicitor. In 2010, he was elected to Congress by a wide margin. All indications are that Mr. Gowdy is an intelligent, hard-working man. I agree with him on some of his political positions and disagree with him on others.

Everyone who has not been hiding under a rock knows that we are still in the early stages of learning about a scandal that has occurred over the last few years at the IRS. While we don't have all the details, there has been an admission that at least one group within the IRS has "targeted" certain conservative organizations for additional scrutiny in their applications for tax-exempt status under Code Section 501(c)(4) as well as just holding up those applications. Among the groups that some IRS employees have admitted were targeted are those with Tea Party in their name. Important to note is that Mr. Gowdy was first elected to Congress in 2010 with strong support from Tea Party organizations in South Carolina.

It turns out that because of duly negotiated agreements that I understand to have been collectively bargained that the IRS is about to pay out $70 million in bonuses. Frankly, they will be paid out to a large number of people and most of them will not be of the magnitude that will turn your stomach.

Yesterday, Mr. Gowdy said that people in the federal government including the IRS don't get it. He said that you only pay bonuses for performance that significantly exceeds expectations. He bases this on what?

First, to the extent that the terms of the bonus program were collectively bargained, it is unlikely that there is anything that can be done to stop the bonuses from being paid. You see, there is a contract -- a legal contract. Mr. Gowdy, as an experienced attorney is familiar with such things. Second, Mr. Gowdy clearly has spent little time in the real world. Bonus programs are also often known as annual incentive programs. Properly constructed (and I have no idea whether this one was properly constructed), they represent variable pay for those covered and typically pay out some percentage of a target amount depending upon some combination of an individual's performance and their team's performance. Rarely do you find a situation where performance across an organization is so poor and so pervasively poor that no incentives are paid out.

Let's look back. This is an annual incentive program. That means that it was put in place, presumably, to motivate individuals to achieve a set of goals. Surely, a reasonable percentage of IRS employees met their goals and some exceeded them. Just like you and me, most employees of the IRS are honest hard-working people. Most of what the IRS has done over the past year has probably met expectations. In fact, in my personal work experience, their service has been pretty good.

So, despite Mr. Gowdy's belief that you only pay bonuses for exceptional performance, that is not what was negotiated in the contract. It makes for good press to rant about all that the IRS has been found to have done wrong, but, IMHO, Mr. Gowdy has picked the wrong fight.

From where I sit, we appear to have a legislator whose lack of experience with understanding compensation programs is causing him rail on and probably not look as smart as he is. He is not alone. But, Congress sees polls and makes rash decisions that affect public policy. So many people in Congress do not understand the employment deal between employees and employers, but still they make it more complex and bureaucratic each year through new law that none of us understand.

Top business schools often require applicants to have spent some time in the real world before pursuing their MBAs. Perhaps, one should not be eligible to represent his or her constituents in Congress before having achieved a threshold amount of experience in the real world.

OK, I'm done ranting ... for now.

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