Wednesday, March 25, 2009

AIG Bonus Scandal: Get Over It

Most of the people I work with seem to simplify things way too much. AIG and the bonus scandal seems to be the topic of choice when I wrote this anyway, and they are absolutely furious about it. I feel as if I am one of the few who is not really upset at all about the executives getting these bonuses. Here is why.

Reason One - As it has been mentioned before, these bonuses were written in contracts. If we start getting upset when someone has a poor season and still gets their agreed upon contract money, then we need to have a serious look at the sports industry. I can think of a particular quarterback who got trounced in the Superbowl this year but will probably still get a seven-figure bonus. Also, these bonuses are undoubtedly for the 2008 fiscal year, which wasn't nearly as bad as the 2009 fiscal year has been. There are lots of businesses, mine included, that made money in 2008 when all quarters were averaged.

Reason Two - There were $165 million paid in bonuses. This is one tenth of one percent or 0.1% of the total $152 billion that we taxpayers have given to that company. Spending so much time getting ulcers over such an insignificant amount of money compared to the whole simply isn't worth it. I would much rather spend my time and effort finding out what AIG did with the other 99.9% of the money we gave them.

Reason Three - Our government in all its wisdom has chosen to retaliate these bonus give out by writing a law that will tax these bonuses by 90%. A collective cheer went through most of the people I work with but to me this scares the heck out of me. There were only 168 people at AIG that got bonuses and prompted this legislation. Only 47% or 79 of those people actually live in this country where they can be taxes. Our government is choosing to write a law targeting these 79 people or 0.00002% of our population in retribution. They are supposed to govern the masses, not the specifics. So if I were in the Male Engineers That Grew Up In Iowaville Society, I would be worried. I could be next. This is a horrible precedent to set.

Reason Four - Why don't we place blame where blame should be placed. How about we blame the 535 people who voted to give $456 from every man, woman and child here in this country to a company that largely does business outside of the United States and didn't even give them a single restriction on how to use it. These individuals should be drug out of the back of the building, tarred and feathered and told never to come back. This should have been done long before AIG was even a common word on the news but that is another argument for another day.

Weak Reason Five - I have to set goals in my job and I get rewarded if I meet them. As an employee, I try to make them as easy to accomplish as possible because hey, who wants to set impossible goals. My boss however, he wants to make them as hard as possible so that he has more things done at the end of the year. So why do we blame someone who worded their contract such that they get a bonus even if their employer goes in the tank. Heck those guys are geniuses and I wish some of them would give me pointers when it comes time to write my goals for next year. They are doing what human nature says to do.

We have focused for two weeks now on extracting vengeance and every single drop of blood we can out of 79 people, many who have now returned their bonuses. If I added up all the wasted "on-the-clock" time of our Congress, journalists and average people fuming at the water cooler or for that matter, writing blogs on the subject, we would have more than paid off those bonuses hundreds of times over. So to summarize for those still hot under the collar about the AIG bonus scandal… get over it.

12 comments:

Sage said...

I see both sides of the issue here, but I also agree that trying to punish one small group is dangerous and probably unconstitutional. There are many problems here. First of all, there is no reason that top executives need to be making 400x what regular employees make--those of us who are stockholders need to be screaming (especially when the companies are losing money or market share), but the incestous relationships between most Board of Directors keeps this from happening. If every CEO & CFO sits on the board for friends companies, are they really looking out for the best interest of said company by approving such bonuses? These bonuses shouldn't have been paid or agreed to... And as the main shareholder in AIG, the govt does have a say. However, making a law that applies to this situation isn't the way to handle it. Maybe a better way would be to force the breakup of the company--and allow the sections of the company that has had all the problems to fail--many of these bonuses, from my understanding, are two year agreements, the bankrupcy court can decide who gets what of what's left.

The Real Mother Hen said...

Ah well said, Ed, well said! People in this country get upset simply because the media tells them to get upset. Very very few people stop and think. What scares me the most is, all the people who cry about the bonuses think they have a brain and injustice in them, like a superhero. They think they make noise and people listen. Boy oh boy, the truth is, they are really just sheep following the blind and the corrupted (ie the media and politicians).

TC said...

You might enjoy this: http://www.aaronmelton.com/2009/03/24/more-on-the-aig-bailout-brouhaha/

Ed Abbey said...

Sage - I think there should be a whole lot more bankruptcies allowed to happen. It weeds out the lot and makes the companies stronger in the future.

Mother Hen - That is exactly why I tell people that if you read a media because it is a liberal or conservative source, you are screwed from the get go. You need to read and listen and then formulate your own opinion. In this case, my opinion is that the bonus scandal is the wrong direction to focus our anger.

Ed Abbey said...

TC - Another good article on the subject was this one by Elliot Spitzer. I read the article and thought that it was pretty good so I scrolled back up to see who wrote it only to find Elliot Spitzer's name listed. It rang a bell and took me a few seconds to realize who he was/had been. I guess having a vice for prostitutes doesn't affect your writing ability. I did dig deeper and them discovered that he had been the AG for New York and had made his name initially going after Wall Street fat cats.

Beau said...

The political folks are simply making hay out of this issue to take the heat off themselves. Seems like Dodd, Frank & Co. have done far more damage to the nation/economy over the years.
I think your views are well-stated, and I agree with most of them. But it just really doesn't sit well that an 80% taxpayer-owned corporation is paying millions of dollars in bonuses to the same folks who got us in this mess in the first place.

Ed Abbey said...

Beau - It sure doesn't. But there is a heck of a lot more that doesn't sit well after reading this lengthy article posted at Rolling Stone.

bella rum said...

My son and I discussed this last week when he came down for a visit. We both agreed that writing a law intended to affect a handful of people is a "horrible precedent." It seldom turns out well for the rest of the citizens down the road. As for the anger directed at this small group, methinks a lot of it is mock outrage to deflect their (congress) own share of responsibility for this pile of dung we find ourselves in.

Beau said...

Great article, thanks. They just don't get it, and the bonus model is flawed:
"...Then, in January 2009, the company [AIG]did it again. After all those years letting Cassano run wild, and after already getting caught paying out insane bonuses while on the public till, AIG decided to pay out another $450 million in bonuses. And to whom? To the 400 or so employees in Cassano's old unit, AIG Financial Products, which is due to go out of business shortly! Yes, that's right, an average of $1.1 million in taxpayer-backed money apiece, to the very people who spent the past decade or so punching a hole in the fabric of the universe!"

R. Sherman said...

Well said.

Indeed for the politicians who paid the money, knowing that a portion of it would be used for contractual bonuses, to now enact an ex post facto law which, as you point out, is pretty much a bill of attainder, is disingenuous, if not an abomination. I'm afraid, that there is only more of this sort of thing to come and we will wake up to find out we don't recognize our country anymore.

Cheers.

Ed Abbey said...

Bella Rum - Glad we think alike. Welcome to my blog.

Beau - I have wondered where Rolling Stone got their figures as I haven't seen those numbers by any other news source.

R. Sherman - Agreed... unfortunately.

Aaron said...

Link love! Thanks, TC.