Anyone want to talk about the AIG bonus situation?
A few thoughts to start things off:
1)Clearly, AIG has been terribly mismanaged. And the U.S. financial sector as a whole has become too large, in terms of its total size–including employment and employee compensation–relative to the economy as a whole.
2)The fact that a company has been mismanaged does not necessarily imply that everyone in it has done a bad job. Almost certainly, there are people in the bonus pool at AIG who have successfully achieved their individual goals, regardless of the failures of top management.
3)Bonus plans, in my experience, generally have two components: success of the individual in meeting his own goals, and overall success of the business. (“Business” does not necessarily mean the corporation as a whole–for example, an engineering manager at GE Transportation might be bonused based more on the results of the Transportation business than the whole company.) In general, it makes sense for the proportion of the bonus tied to overall business results to go up with the individual’s organizational level. It appears that there wasn’t much tie to the overall results for the people in the AIG pool being discussed.
4)Bonus plans are usually a part of an individual’s compensation package and, as such, are legally enforceable contracts. I believe that in some states, failure by a company to pay compensation that is owed can result in additional damages, above and beyond the payments themselves.
5)If you are an owner or a part-owner in a business, it behooves you to pay appropriately to attract and keep the people you need. Suppose the U.S. Government, for some strange reason, became majority shareholder of a fashion business. Would it make sense to drive the designers away by cutting their compensation to a level below that which they could get elsewhere? What if the government owned a Hollywood studio? Would we be *more* or *less* likely to get our money back if we required that the actors, directors, and screenwriters all be paid at Civil Service levels.
6)The U.S. Consitution explicitly forbids bills of attainder and ex post facto laws. Some of the proposals floating around in Congress have elements of both.
7)Sen Charles Grassley suggested that senior executive of failing financial companies might want to consider killing themselves. I wonder how he would feel about a similar suggestion for legislators who support legislation that turns out, in retrospect, to have been a very bad idea.
8)Many “progressive” Congresspeople, along with professors and media types, have spoken endlessly about the need for “nuance” and “shades of gray” when dealing with terrorism. In the eyes of these individuals, apparently nuance and shades of gray are appropriate when dealing with people who fly airplanes into buildings, set off bombs in pizza parlors, and bash out the brains of children in front of their parents–but when it comes to American business people, only the highest-contrast black-and-white will do.
9)The atmosphere being created by Congress and the Administration–and by much of the media–has a lynch-mob tone to it which is very disturbing. Don’t be so sure that this treatment will be limited only to highly-compensated people in one particular industry. The guillotines of the French Revolution started with the aristocrats, but did not stop with them.