The Case for Paying Out Bonuses at A.I.G.Do we really have to foot the bill for those bonuses at the American International Group?
It sure does sting. A staggering $165 million — for employees of a company that nearly took down the financial system. And heck, we, the taxpayers, own nearly 80 percent of A.I.G.
It doesn’t seem fair.
So here is a sobering thought: Maybe we have to swallow hard and pay up, partly for our own good. I can hear the howls already, so let me explain.
...If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right.
As much as we might want to void those A.I.G. pay contracts, Pearl Meyer, a compensation consultant at Steven Hall & Partners, says it would put American business on a worse slippery slope than it already is. Business agreements of other companies that have taken taxpayer money might fall into question. Even companies that have not turned to Washington might seize the opportunity to break inconvenient contracts.
...Let them leave, you say. Where would they go, given the troubles in the financial industry? But the fact is, the real moneymakers in finance always have a place to go. You can bet that someone would scoop up the talent from A.I.G. and, quite possibly, put it to work — against taxpayers’ interests.
“The word on the street is that A.I.G. employees are being heavily recruited,” Ms. Meyer says.
Etc., etc.
http://www.nytimes.com/2009/03/17/business/17sorkin.html?_r=1&hpOf course, readers are having none of it. Of the more than 300 (and counting) comments thus far, virtually none are supportive.
Which is putting it mildly.
A sampling:
This argument would make more sense if the government wasn't forcing automakers to abrogate their contracts with their workers and pensioners. Would the columnist have us believe that those contracts that will be modified or cast away were any less legally binding than those at AIG? Balderdash...it's rewarding poor performance at the expense of the taxpayer.
You have disgraced yourself. What have you said that hasn't been said? If anyone wants to hire these guys who ruined the world economy and collapsed their own firms, they are welcome to them. Yeah, they're real rainmakers. And do you think new people can't be hired to unwind the transactions with $165 million dollars?
This column is so unconvincing as to be laughable. Two miscreants create a contract stipulating large sums to be paid to whoever tries to blow up a bridge. The government comes and in stops them from blowing up the bridge, but then because of the sanctity of contracts has to pay the miscreants for trying? Give me a break. If something isn't done quickly this issue will never go away, it will probably outshine the stimulus package as THE legacy of Obama's first 100 days. And similar travesties will surface throughout his administration.
Wow, I guess you can make an argument for just about any self-serving interest there is, but what a bunch of nonsense!
So, the main reason aside from breach of contract concerns is these people "trading against" AIG's books once they leave the company? Is there something stopping them from using that very same bonus money to do the same thing? Is that not insider trading, if they are using their knowledge from being "inside" of AIG?
So we need to worry about future crimes to the extent that we let present ones go unpunished?
And about the breach of contract thing, what kind of contract pays out on a complete sham of a failure? Massive losses over the last 5 quarters and you get a bonus-- only in New York!
Yes, you make your point. BUT something is fundamentally wrong with a company that signs contracts guaranteeing bonuses regardless of profit or loss. And, why should anyone trust any solution these super smart folks come up with?
Etc., etc.
http://community.nytimes.com/article/comments/2009/03/17/business/17sorkin.html