In Praise of Team Performance

Imagine that your CEO sent out the following memo to all employees in the company:

Dear Fellow Employee,

As you know we operate in a highly competitive marketplace. Our growth aspirations face many challenges. I believe we have assembled a superb set of talent to overcome those challenges. The key to our success will be how we operate as a team.

Today, I am announcing the elimination of all individual performance bonuses. Each employee’s total bonus target will be the same as before but we will be calculated bonus payout based upon a unified set of company performance factors. Simply put, my bonus performance per cent realization will be the same as yours. Starting today, we are one team. Go Team!

Your CEO

How would you react to this memo?
Is this a fair system?
What behaviors does this system encourage and discourage?