Archive for March 17th, 2009

AIG to Pay Bonuses? Are Bonuses Ethical When a Company Fails?

Posted on March 17, 2009. Filed under: News of the Day, Political Issues |

The mortgage insurance giant, AIG, is paying out $165 million in bonuses to its top executives after receiving about $170 billion in bailout money from the US Government, which basically means the taxpayers own about 80% of the company. The paying out of huge bonuses to executives and sales staff, while running a company into the ground and almost causing the collapse of the entire economic system is ethically questionable at best, albeit extremely complex, and criminal at worst.

The difficulty is that apparently bonuses are part of contracts that companies have with their top executives and sales people, and they are guaranteed. This has been hitting the news a lot recently about various companies that have received bailout money still handing out millions in bonuses and taking expensive trips for sales meetings or spending lots of money on remodeling offices and even executive washrooms. The public is outraged and the politicians are as well, even though it was the politicians who gave the money, no strings attached(!) to these companies that were “Too big to fail”.

I was extremely leery of all these bailouts and TARPS under the Bush administration because it looked like an unnecessary intrusion into the marketplace and it looked like free money, bribes even. No it is coming back to haunt the politicians as some of the stories below will demonstrate.

But if the contracts were legal with these execs, what is to be done? The only analogy I can think of is some of the contracts made with star athletes. There are some signing bonuses that are given out that flat out guarantee a certain amount of money, regardless of performance. Then there are the actual salaries that can be, again, guaranteed. But many contracts do have performance bonuses for the athletes that are only paid out if the athlete accomplishes some clearly laid out goals.

If a company hires an exec or sales star and they sign a contract that guarantees a certain salary and certain bonuses, regardless of performance, that is a risk the company takes. However, if it is the Board guaranteeing the board members these bonuses…that seems unethical and would explain why their company is failing.

I think it is a little bit disingenuous for the Obamasky government to be all up in arms over the bonus situation.

My personal opinion is that a lot of these contractually guaranteed bonuses seem to me to be unethical, greed based, and should be examined closely. I do see that the bonuses may be a good thing if they were honestly included and are used to retain the best personnel who can rebuild AIG. Furthermore, with the drop in bonuses of many companies so too the income tax revenue of NYCity declines. Perhaps the libtards are going to kill the goose who lays the golden eggs?

www.nytimes.com/2009/03/17/business/17sorkin.html?_r=1&hp

www.washingtonpost.com/wp-dyn/content/article/2009/03/16/AR2009031600640_pf.html

www.foxbusiness.com/story/markets/industries/finance/dodd-cracks-aig—time/

www.rushlimbaugh.com/home/daily/site_031609/content/01125111.guest.html

Finally, here is an excellent article by Tim Rutten in the LATimes, writing from a labor union perspective. He brings out some really good points that I hadn’t thought of. Basically he shows that when the auto industry came to Congress for a bailout, they were told that both labor and management were to take cuts. But in the Bank bailouts and Financial Institutions like AIG…executives get to keep their bonuses. It seemed like Rutten was asking for a break for the unions, again, but my solution lies more along the lines of, “Get government out of the market place; government is only making it worse.” Here is the LATimes article:

www.latimes.com/news/opinion/la-oe-rutten18-2009mar18,0,3290633.column

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    This blog exists to study the bi-vocational ministry, explore the Bible & Theology, and look at current events, history and other world religions through scripture, and have fun doing it!

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