In response to the uproar over the millions of dollars in bonuses paid to the executives of AIG (you know, that company that would be bankrupt if not for the billions of dollars in loans it's taken from the US government), AIG management explains that it had no choice but to pay those bonuses because it was contractually obligated to do so. The Treasury Department, despite wagging its finger sternly at AIG, appears to accept that argument.
On salon.com Glenn Greenwald details
why AIG's argument is transparently bogus. Contracts get renegotiated all the time when companies are in financial jeopardy. So what makes these contracts untouchable?
The truth must be that it's either a) a case of blatant cronyism, or b) the executives have some leverage that would make it more painful NOT to pay them than to pay them. (The latter argument is detailed
here.)
What confuses me is the use of this word "bonus". Evidently these guys expect this money regardless of their own job performance or of how well the company does. In which case, shouldn't the payment be called "guaranteed compensation" or something similar? Calling it a bonus makes it seem analogous to the tip a waiter receives for good service.
Comments
As has been noted by others, if these guys (and a few gals) get any better at what they do, we're all sunk for sure.
Uh, where is the "good performance" in the largest business collapse in history?
To use a grade school analogy, these guys want a Gold Star for getting an "F."
I also fail to see why this is controversial, yet the IRS letting the idiots who invested with Madoff (and who likely suspected the man was ripping someone off, just not them) write off their losses.
If that's the case, then my wife is correct that the word "bonus" no longer has any meaning.
"ecause for some reason part of their income is called a "bonus" and given separately, we think of it the way we perceive a bonus, like a Christmas bonus for many jobs, something extra given as a gift or thank you."
If it's just part of their normal compensation, why is it separate from their salary?
The CEO of AIG has said that the bonuses are necessarily because, without them, the company couldn't keep the "best and brightest." Putting aside the fact that if they really WERE the best and brightest, the company wouldn't be the largest corporate failure in history, his statement implies that the bonuses WERE bonuses, in the normal meaning of the word.
"Moreover, it is very likely unconstitutional for Congress to force this issue (it would be a bill of attainder.)"
Um, I don't think so. Since the Federal government now owns 85% of AIG, it is no longer a "third party," is it?
Of course, now many people are suggesting that since these are the same executives who contributed to the mess that these corporations are in, wouldn't it be a better idea to let other corporations lure them away and thus to sneakily damage your competitors while cutting back on deadwood in your own corporation?
It also appears that these bonuses are all contractually demanded, and also are at a fixed rate. So it doesn't matter how productive the executive is or how bankrupt the company is, the bonus remains the same.
The rest of this is hearsay from a friend of mine who is running for Congress, rather than from my own research. So any information on how accurate or inaccurate it is would be good. Anyway:
According to him, the reason why these bonuses are pretty much engraved in stone by contract, are set at a fixed level rather than based on performance or company finances, and are free of taxation is because Congress made it so in the 1990's. It seems that there were three separate acts of legislation or somesuch that set those properties in place. Which basically means that Congress actually set in place the current situation at AIG with the bonuses, and are now acting all shocked and horrified that that's the way things are set up. I haven't been able to find out anything one way or another on that, though.
"Democratic Senator Chris Dodd of Connecticut inserted language into the scam-stimulus bill permitting the AIG bonuses that everyone is now bloviating about. He did so at the request of the Treasury Department. A Congressional majority then voted for the Dodd proposal, and President Obama signed it into law."
So...
" * Either those who voted for the scam-stimulus bill knew about the bonus provision, in which case they ought to be "falling on their own swords," instead of castigating the government-appointed CEO of AIG, or . . .
* They didn't know about the bonus provision, in which case they ought to introduce DownsizeDC.org's "Read the Bills Act," so they'll know what they're passing before they cast their votes. "
From that point of view, here's what happened: The Company, AIG, was on the verge of collapse. Due to the actions of these executives, who helped negotiate a $200B government bailout, the company still stands. Therefore they should be rewarded for saving the company.
If they had gotten the $200B from anywhere except the taxpayers, they would be hailed as heroes. The only reason we care that bonuses that amount to less than 1/1000th of the bailout money received is that in general use, as mentioned above, a "bonus" is considered to be something paid for excellent work while in business it's an expected end-of-the-year payout.
It's not that the word "bonus" has lost it's meaning, it's just picked up another one, like the word "crash" as seen in the distinction between a computer crash and a car crash.