Like everyone else I was initially outraged over these supposed AIG bonuses. But I have changed my mind on this and they need to pay these compensation contracts.
First of all these can not be performance bonuses, maybe they are attendance bonuses or bonuses that reward poor stock performance. Either way it seems that these bonuses were designed to be compensation for these bankers. It would be interesting to review these contracts. If these are performance bonuses and they performed then you can not destroy this culture of compensation for performance. Maybe we should pay our congress people this way (omg could you imagine the corruption?).
Secondly, you may think that these guys are a bunch of crooks; after all they drove this bus into a wall. So why should we allow these crooks to continue driving the bus after this major accident? Well the answer to this is that they knew exactly what they were doing. They understood the risk and they did it anyway because they were greedy. This does not necessarily mean that they are incompetent when it comes to performing the core of their job. They have a great deal of insight into how this thing is wrapped up and we need them to un-wrap the mess. So you may ask “why are we rewarding them for their greed and irresponsible actions?” Well inside of any group of people (AIG included) there are group relations and groups of people always revert to their lowest denominator. Group empathy is a powerful force and allows a group or a crowd to do things that the individual is not capable of. Hence the phrase “one bad apple spoils the bushel.” We need to find the bad apples and eliminate them, keep the institutional knowledge and right the ship. You need to properly compensate the rest of the bushel.
My next point on this issue is that it is in your best interest to allow this company to run itself. This is absolutely not a democratically run institution and nor should it be. I will grant you the fact that because of this infusion of capital we are all investors, this investment is not by choice, and given this past year’s performance you would not invest under these circumstances. This does not give the mob the right or ability to make management decision. It is in your best interest to allow a management team run this company. I feel that as an 80% owner the government should have the voting rights to install whatever management team that they see fit and to properly compensate those individuals. Once in place investors need to allow the management team to run the business on a day to day basis and give them the freedom to make compensation decisions.
This point is a real sticky wicket because the government is the largest investor and the only possible investor. At the same time the government has no business whatsoever dictating employee compensation. So how does one straddle the line between government and investor? I am not sure but I know that the common ownership, control over the means of production (day to day operations), and the common specification of compensation, defines communism. All of you bail out complainers are doing your level best to promote communism. Congratulations!!
My last point is about Connecticut senator Chris Dodd. Dodd is considering a proposal of a bill that will tax these bonuses such that the government can reclaim 98% of this money. Well I have to say that I appreciate his creativity, though I heard this same idea on the Sound Off Connecticut show today, and I am not sure he can take the credit. This idea is fun to think about but it is really bad and sets a precedent for government targeting a tiny set of individuals for unfair taxation. When you are the next target you’re not going to like it so much.