Saturday, March 21, 2009
Adding insult to injury, news broke over the weekend that instead of the previously reported $165-million AIG handed out in retention bonuses, the total is actually $218-million, an additional 30% kick in the taxpayers' groin. The AIG saga seems to get worse by the minute. On the one side, we have a mounting populist movement seeking everything from a return of the bonus money to public flogging of the executives who took it. And on the other side we have the Wall Street sympathizers and legal junkies who cry "witch hunt" and vehemently oppose retributive measures such as 90% taxes on the money, prosecution of "fraudulent" behavior, and most important, the voiding of the employees' contracts which promised the bonuses.
To be sure, for most Americans, the AIG bonus debacle in particular has come to symbolize the years of unprecedented greed and de-regulated hijinks on Wall Street by reckless, credit-default-swapping, derivatives-dealing cowboys who damn-near single-handedly caused the collapse of the U.S. financial industry. And as the average Mom and Pop fears for their jobs, their homes and their savings, it's easy to understand their gargantuan outrage and frustration with the current system in which these arrogant bankrupters are rewarded for their miserable failures with taxpayer money.
But there is a simple solution which is not only fair, it makes sense. In a nutshell, rather than allow these bonuses to remain in tact or to take them away outright, how about deferring them until the companies and their troubled business units turn their financial fortunes around and become profitable? Now that's a novel concept, huh? Tying compensation to performance. Let's dangle the proverbial carrot in front of these high-flying Downtown deal-makers. You wanna get that million-dollar bonus, pal? Earn it, dammit! Stop losing money and start making it. And make enough to start paying back to your boss, the American taxpayer, the $200-billion your company needed in bailouts to stave off death stemming from your gross irresponsibility and high-risk activity. Then, and only then, will we be ok with you taking that huge paycheck. Whattya say, pal, deal?
Lastly, it's time to dispel a few of the biggest myths surrounding the AIG saga:
-"The contracts are legal and cannot be voided:" It's quite the convoluted argument that these employees have a valid legal claim to these bonuses when in fact their contracts would've been voided through bankruptcy had the U.S. government not bailed out the company.
-"We need to pay these bonuses in order to retain these employees because they're the only ones who know 'where the bodies are buried' and we need them to unravel this mess:" In that case, let's let every murderer off the hook--or better yet, pay them--because they literally know 'where the bodies are buried'....
-"We need to retain these people so they don't leave and go elsewhere and we can stay competitive:" First, where the hell are these folks going? Who's hiring on Wall Street? And, I know tens of thousands of unemployed Wall Streeters who'd gladly take these jobs left behind by the unretained.