Google gives each employee a surprise $1,000 (tax free) bonus and 10% pay rise. Which is absolutely the right way to approach incentives, from an incentive theory point of view, and no real surprises there - the theory is well understood and just kind of lying around so not a big deal for Google to pick it up and implement it. Slightly odder is Eric Schmidt's justification for the move (which is estimated to cost in the order of a billion dollars) -
"We want to make sure that you feel rewarded for your hard work." Yup, it'll do that. Good idea.
"We want to continue to attract the best people to Google." Nope, won't help with that even a little bit. The unexpected windfall incentive is great for rewarding previous work. It doesn't inspire other people to come and work for you, unless they happen to believe you'll do it again. There's no reason to believe that here, and it's a pretty nebulous hope that this will arrest the brain drain from Google to Facebook and 0thers too. This is a smart move to reward, recognise, motivate and incetivise the existing Googlers, but it only does what it does - it's not a panacea for any problems Google has hiring new people.