GVC reported earnings late last month and while they were quite positive on paper, once again the issue with GVC is not what the company emphasizes, but what it conceals through sleight of hand. Not in any illegal way of course – no accusations intended here – but GVC does have a way of putting crucial information on paper without bringing too much unwanted attention to it.

Before we get to that, CEO Kenny Alexander’s firm has been doing some things right. Right out of the gate, he has changed the bonus structure for Bwin.party’s executives to being performance-based rather than automatic. The term “bonus” is a bit misleading here though because it implies a salary above market rate for the job, which is not really what a bonus is. The final price for labor after all factors are accounted for is the market rate for the job, regardless of the nomenclature one may attach to different aspects of the price. Just like discounts are really a reflection of a lower market-clearing price for a good rather than an actual below-market price, bonuses are simply part of the market-clearing price for an executive in charge of a lot of capital. Simply put, if the number of buyers and sellers are equal, you are at the market price whether you call it a discount, a pay cut, a bonus or whatever.

Back when Bwin.party was being criticized for dishing out “bonuses” to an executive staff presiding over acute shareholder losses, the conundrum was that Bwin.party had to pay them because denying them would have made them look even worse. The real answer though is that the market sets the rate for high level executives, and failing to pay bonuses, which are part of the market price, means you are paying a below market rate for a job. And that means that labor migrates elsewhere. Losing your staff in the midst of turmoil is not ideal, so Bwin.party kept paying.

What GVC has done is not exactly “change culture” in Alexander’s words, but simply follow the supply and demand curve for executives. With the merger, the supply of executives at GVC/Bwin.party has gone up, and the demand to retain those executives has diminished because the combined company can now replace them more easily. Higher supply and lower demand means a lower price for the labor, and now the bonuses will be contingent on value creation, which if successful will up the market price. The test of whether GVC has hit the market price here is if Bwin.party execs start leaving the group. If they don’t, all that has happened is a new market clearing price. Either way, the move is a good one for the group.