AIG Bonuses…Can We Talk Rationally?
From the bit of testimony I heard today it turns out that the AIG bonus payments were for Retention and not Performance.
Let’s say you are a key person working at a failing company or a division that is to be sold. Your instinct is to get out and find a new job. The company needs to keep you though for an ordely transition. So they offer you a bonus if you stay through a certain date and accomplish certain things. This is not bad practice…I have done it myself. Who is going to do the work? Volunteers? How easy do you think it is to attract people to come work at a company that is going to be sold or shut down??
So the debate is fine…maybe the numbers are too large. But the hysteria is shocking and disturbing. And there is nothing worse than watching those holier than thou congressmen talk so demeaningly and insultingly to people who don’t neccessarily deserve it.
Call me crazy…but I hear some things being said in the halls of our congress that sounds too close to something a fascist might say….like a unilateral gov’t right to impose 100% taxes on certain people’s compensation if the gov’t doesn’t like it. Outrageous!
Eric Weider
AIG Bonuses…Can We Talk Rationally?
I think the answer is no.
http://www.cnn.com/2009/POLITICS/03/19/bonus.bill/index.html
Pay special attention to the big name politicians strutting around on this one. Maybe companies will start to trade chickens to retain employees?
Quite so. Our constitution explicitly protects us against ex post facto laws and bills of attainder. Congress ought to know better, collectively and individually.
Of course these contractual bonuses are annoying – and unreasonable. That’s not the point. The right of any individual, however, to enter into a free contract is a right to be protected by government of the people, not abrogated for popular political purposes.
In general, the public is not well informed about executive compensation issues, and I understand the public’s outrage with excessive executive compensation (which often seems to bear no relationship to performance) generally and with the AIG situation in particular. However, the public should save most of its outrage for Congress.
The House approved the invalidation of contracts. It no longer matters what your contract says, Congress can simply ignore it or change it.
The House approved retroactive taxation, which to my knowledge has not been done before. It doesn’t matter what you earn or when, Congress can take it all without prior notice.
Excellent points, Eric. Geithner and these AIG recipients are the only targets standing still in these shooting range, which, by some accounts, is the result of the 1999 Financial Services Modernization Act–i.e., the act that deregulated the financial industry and repealed part of the Glass-Steagall Act, which, curiously, was passed in 1933.