Ok, so I made up that last part, but seriously, folks. This is ludicrous. I understand that Congress, after having doled out more money in unstimulating stimulus funds than my mind can wrap itself around, has now decided that they get to determine everything for companies like AIG from executive salary caps to the kind of kind of toilet paper is stocked in their washrooms. But here's the problem, and it's one that Congress, made up largely of individuals with legal backgrounds, should realize: this move is punishing EMPLOYEES, not COMPANIES.
Why's that, you say? Contractually, AIG was obligated to pay those bonuses, per agreements made before their financial troubles threatened to topple the insurance giant. Surely, lawyers understand contracts. They are the most basic of legal instruments, after all. And prior to them paying out, the Treasury Department determined that the bonuses could not be legally blocked.
Ah, heck. Can't block 'em. So we'll just steal 'em. I mean take 'em back. I mean redistribute the wealth to another
I think it would have been appropriate for the senior leaders who received bonuses to turn them down. And I would agree that the bonuses were not deserved, considering the current financial stress facing the company. But it was a contract. And if the government is looking to punish AIG as a corporation for paying out bonuses, taxing the hell out of their executives as individuals is certainly not the way to do it.
Congress doesn't give a tinker's damn about that money, however. They simply don't like being one-upped. Afterall, it's supposed to be their job to go around handing out funny money to those who don't deserve it.
Read more here: US House passes 90 pct tax on bailout bonuses
Readers, it's your turn: comment away!
undeserving
I don't understand any company that has a bonus plan in place where the first threshold is not "make a profit."
ReplyDeleteIt's not that unusual. Many companies have bonus plans that are tied to meeting performance metrics other than making a profit. It's meant to incentivize employees to stay on board even when the company isn't making money.
ReplyDeleteIt would make sense for AIG to restructure their bonus plan, considering their current financial situation, but just because they haven't yet doesn't mean their individual employees should be slapped. And considering all of the work AIG is doing to return to profitability, I'm guessing that their bonus structure wasn't at the top of the list of problems to tackle.
Thanks for visiting! Hope to hear more of your thoughts later - and feel free to introduce yourself - my commenters are friendly folks, and I only censor comments if they become obscene or abusive.
I must say I am a little irritated at the whole money give away to a company that built their house on "shifting paper." As far as honoring contracts go, seems funny to me that people are all worried about honoring all these exec contracts but didn't seem at all bothered by breaking the contracts of auto workers. I am beginning to maybe think that Congress should have just stayed out of the whole bail out mess--although I shudder to think of the alternative.
ReplyDeleteUnfortunately, Gayle, I think that AIG may have found it more imperative to honor contracts meant as incentives than auto companies did, and here's the point of view I believe they would see if from: executives have skills that can easily translate to make them attractive to different companies in different industries. A CFO would do a similar job working in healthcare or for a retail chain. An autoworker is so specifically trained to that industry, that there isn't as much of a retention problem, as it would be necessary to completely retrain to change jobs. And because the bonuses were tied to retention, I think that may have a lot to do with what contracts were honored or broken.
ReplyDeleteMind you, I'm not saying I agree with that...I personally think that contracts should always be honored between a company and an employee until it can be mutually amended. But I'm just trying to explain what I think was the rationale used.
I think that Congress ought not ever have engaged in bailouts, personally. Economic projections by the government's own accounting arm show that the stimulus package actually made the length of the recession longer, not shorter. So the bail outs were a band aid and nothing more. And the sad reality is that sometimes, companies will fail and that will serve to strengthen the overall marketplace.
Now that the government has placed itself firmly inside of this mess, it's up to them to provide fair oversight. And that does not, in my opinion, include absurd 90% taxes. We'll have to see what happens! I was willing to give this President just enough rope to hang himself with - just enough of a chance to prove my fears wrong - but right now, he's standing on tippy toes and my fears only continue to grow.