In 1993 Congress added Section 162(m) to the tax code. A public company could no longer deduct more than $1 million a year in pay to a top executive. Pay that counted as performance-based was exempt. Stock options typically qualified.
An article in the Pittsburgh Tax Review states that the section “contributed to the dramatic increase in the use of stock options and other forms of performance-based pay.” The Tax Cuts and Jobs Act of 2017 repealed the exception.
President Jimmy Carter signed the Defense Officer Personnel Management Act on December 12, 1980. A RAND study describes the system it created as “a competitive, up-or-out career flow.”
The rule at its center is short. Officers “twice nonselected for promotion are subject to involuntary separation.”
In 2009 Netflix described its culture in a slide deck. One slide said: “Adequate performance gets a generous severance package.”
Another slide gave managers a test: “Which of my people, if they told me they were leaving, for a similar job at a peer company, would I fight hard to keep at Netflix?”
In the National Football League, Black Monday is the first Monday after the regular season ends. It is the day many head coaches are fired. An Associated Press headline of December 29, 1998, read: “NFL coaches face ‘Black Monday’ with five fired.”
Long service does not protect a coach. In 2024 the New England Patriots parted with Bill Belichick after 24 seasons.
The No Child Left Behind Act of 2001 set an ultimate goal. All students were to reach “proficient levels by 2014.” Schools were measured each year against a target called adequate yearly progress, or AYP. Education Week called AYP “the measure by which schools, districts, and states are held accountable for student performance.”
A school that missed AYP two years in a row was identified for improvement. More sanctions followed if it kept missing. In December 2015 the Every Student Succeeds Act replaced the law. It moved the federal accountability rules to the states.
In the 1980s Jack Welch introduced a ranking system at General Electric. The top 20 percent of employees were the most productive, and the middle 70 percent did adequate work. The bottom 10 percent were to be fired. The practice became known as “rank and yank.” Welch called it “differentiation” and defended it. “If you want teamwork, you identify it as a value.”
Microsoft used a version called stack ranking. Each employee received a single rating from 1 to 5. The rating “triggered increases in merit pay, bonuses and the awarding of restricted stock units.” In November 2013 Microsoft’s head of human resources, Lisa Brummel, ended the system in an email to employees. “No more curve,” she wrote.
On October 26, 2022, the Securities and Exchange Commission adopted Rule 10D-1. It carries out Section 954 of the Dodd-Frank Act. Every listed company must have a policy to take back incentive pay, such as cash bonuses and stock awards tied to financial results, from its executive officers when it has to restate its financial results.
The rule reaches back three years and covers former executives as well as current ones. Fault does not matter. Recovery “is required regardless of whether the executive officer engaged in any misconduct.”
The American default: either party may end the relationship at any time for any lawful reason, without notice. Forty-nine states apply it. There is no statutory dismissal protection accruing with service, and no requirement to justify the decision.
American sales roles are frequently paid mostly or entirely on commission, with no ceiling. The earnings are a direct function of output, and the arrangement is regarded as motivating rather than insecure.
Glengarry Glen Ross provides a ruthless portrayal of American sales culture, where negotiation is framed as a winner-takes-all contest. In a memorable scene, Blake, a corporate sales trainer, announces a sales contest with brutal terms: first prize is a Cadillac, second prize is a set of steak knives, and third prize is termination. Blake employs coercion, threats, and financial incentives to motivate the sales team, demonstrating an aggressive, high-pressure negotiation style that prioritizes immediate results over long-term relationships.