Okay, seems like the moment of outrage might be bubbling up... as AIG announces $165 million in executive bonuses. After a $75 billion government (taxpayer) bailout, and a request for more. Or something ridiculous like that.
I've only read a few articles, but it's enough to just make you sick. The AIG head, conveniently named "Liddy," argues that the company is contractually obligated to pay these bonuses. Well, if it's a contractual obligation it's not much of a "bonus," is it? Aren't bonuses supposed to be rewards for good years? And you don't know if you'll get them until you know if it was a good year or not? And AIG, resoundingly, did NOT have a good year? Yeah, contractual bonuses are a BAD IDEA.
So Liddy's saying that paying the bonuses is better than the alternatives -- that those *top quality* executives (huh) might decide to leave for better-paying jobs, or my guess is that they might try to sue AIG for breach of contract to try to get that money anyway. Which would then mean AIG would still have to pay the bonuses plus legal fees, etc., so the argument is that it would take even more money not to pay than to pay in the first place. Right? Is that what they're saying?
I've heard lots of arguments, from the Administration and from my economic news podcasts, about why it's important for us to grit our teeth and save AIG cuz it's just too important a company - as the major insurer to just about all other major companies and industries - to fail, and that losing AIG would have an even more catastrophic effect on the economy. But, good Lord, how can we continue to reward this kind of behavior??? Is there anything the government can do to put more controls on the bailout money so that it's not used for bonuses or bathtubs or corporate retreats or anything other than strictly shoring up the bottom line?
And if there's finally going to be some populist outrage about some of this stuff, what form will it take? I hope everyone out there with Congressional representation (yes, I'm still waiting) lets their elected officials know what they think about all of this. I'm just imagining how all of this will read in history books 50 years from now, and it's not pretty. (And those history books just might be written in Chinese.) Here's hoping we all pull ourselves out of this soon.
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Update: This just came across my inbox. We'll see what happens.
News Alert
from The Wall Street Journal
March 16, 2009
President Obama, trying to contain a political firestorm, has instructed Treasury Secretary Timothy Geithner to "pursue every legal avenue" to block $165 million in bonuses to American International Group executives who were in part responsible for the company's near collapse.
"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama was scheduled to say ahead of a small businesses announcement, according to prepared remarks released by the White House. "Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?"
http://online.wsj.com/article/SB123721970101743003.html?mod=djemalertNEWS
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1 comment:
Right on Stef. The hard thing is that there seems to be a different definition of bonus on Wall Street than there is on Main Street. As a nonprofit drone, there's no such thing as a bonus for me but folks I know in the for-profit world get bonus if and only if the company had a good year and can share the windfall with their workers. This seems to be more like a tip to a restaurant server where it's an expected part of the compensation. The difference is that restaurant servers are paid below minimum wage with the expectation that the tips will make up the difference.
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