David Foster

More on the Bonus Issue

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Powerline:

Wells Fargo didn’t want any TARP money, but the government forced it to take more than $5 billion worth, so Wells Fargo employees who receive bonuses would be subject to Pelosi’s proposed tax. Say you’re a teller at a Wells Fargo branch in Minnesota and you’re married to a lawyer who makes $250,000 this year. You get a $10,000 bonus for your good work during 2008. The government steals it all (90 percent federal plus 8.5 percent state plus, unless it’s included in the 90 percent, 3 percent Medicare). That is simply insane.

If the Pelosi bill is actually enacted into law (which I still think is doubtful) and upheld by the courts, there is no limit to the arbitrary power of Congress. In that event, we have no property rights and there is no Constitution–no equal protection clause, no due process clause, no impairment of contracts clause, no bill of attainder/ex post facto law clause.

See my previous post here.

AIG Bonuses

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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.

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April Fools Day is Coming

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…and so is the rally to inform Congress about the damage being created by the poorly-thought-out provisions of the Consumer Product Safety Improvement Act. More about the CPSIA here, here, and here.

Even if you’re not in the toy business, or a science kit manufacturer, or a children’s clothing maker, or a thrift shop owner, or a homecrafter, you should care about this issue.

April 1, Washington, DC. Please attend if you possibly can.

UPDATE: Apparently there is some proposed legislation which could have a serious negative impact on small farmers and on farmer’s markets. Maybe if enough people get involved soon enough in reviewing this legislation and making their opinions known, we can avoid another CPSIA-level regulatory debacle.

Next in the Crosshairs: America’s Mining Industry?

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This article reports on HR 699, the Hardrock Mining and Reclamation Act of 2009, introduced by Congressman Nick Rahall and co-sponsored by a number of Democratic Congresspeople. In the view of the writer, this bill would have a devastating effect on the industry–especially the smaller miners. (The publication in which the article appears seems to be oriented toward a readership of small miners.)

Anyone here in the mining industry, or follow the mining industry closely? Any reactions to this proposed legislation?

Maybe it’s not as bad as the writer suggests…OTOH, in view of the disastrous Consumer Product Safety Improvement Act, it would not be wise to put too much faith in the collective judgment and common sense of this Congress.

More on the CPSIA

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Yesterday’s WSJ has another article on the damage done by this irresponsible legislation.

Don’t kid yourself that–just because you’re not in the toy business, or a science kit manufacturer, or a children’s clothing maker, or a thrift shop owner, or a homecrafter–this doesn’t have anything to do with you. Whatever your livelihood may be, there are plenty of Congressmen who would casually destroy it for the sake of a photo-op. And in the current political climate, such destruction will become more and more common.