Fighting the Bonus Tax
As you may have read in my previous post regarding AIG, I see little wrong with the contracts that were written a year ago under US Government supervision for AIG executive bonuses. To top it off, the US House of Representatives has passed a MASSIVE surtax on bonuses – a type of ‘Salary Cap’ if you will. I found a solid article in the Wall Street Journal regarding the issue, here are a couple quotes:
“The House passed legislation on Thursday to impose a 90% surtax on bonuses granted to employees with household income of more than $250,000 at companies that received at least $5 billion from the government’s financial rescue program.”
“Citigroup Inc. CEO Vikram Pandit and Bank of America Corp.’s Kenneth Lewis both issued memos to employees criticizing a tax that would make it hard to retain workers. And J.P. Morgan Chase & Co. CEO Jamie Dimon reassured his 200 top executives in a conference call that the bank is actively engaging Washington on the matter.”
Yes, you read the quote right – 90% surtax. A surtax is a tax on top of taxes for those who make a certain amount of money. Enacting a law that essentially limits the amount an individual can be paid because they were given government money is baffling to me. And its even exacerbated by the fact that not only are they limited, but that money is actually given back to the government.
I realize that the money received by the banks must be repaid, but that doesn’t mean that all employee’s should have a cap on their pay. In order to entice, recruit and maintain the type of talent banks will need in order to pull us out of our current state, appropriate compensation will be needed. Unless you are AIG’s CEO Ed Liddy making $1 a year (ironic isn’t it?) you are most likely not going to stand to have your wages capped or cut. Most executive pay is within contracts where if they meet certain goals they are rewarded with large bonuses.
In order for us to return to “normal market conditions” – the market needs to correct itself. With exaggerated government interference this will only lengthen the return to our strong economy.
What’s wrong with paying employee’s for their accomplishments? If an executive can help provide a return within their department (which will pay back the government) – they should receive a bonus for this work. Thoughts? Ideas?
Thats all good and fine, but the bonuses were given at an inappropriate time. AIG HASNT been paying down that federal loan, in fact they have been taking more. How is it appropriate to give ANY exec a bonus when that is the situation? Until real progress is made and AIG doesn’t need this federal crutch, shouldn’t all the execs make a $1? I have a hazy understanding that we need AIG around, and shouldn’t let them flounder, but I think that public injection of funds should make them feel they are on notice and shameful, not comfortable and lazy.
Contracts, shmontracts. If the money ain't there (bailout = "ain't there"), peeps don't get paid. Since 90 percent of all U.S. firms have less than 20 employees [US Census Bureau] this should hit home with a lot of people who are closer to the nuts & bolts of their respective business. Sorry, you corporate types. Here's a lollipop.
The real tragedy is the government handing over this substantial amount of dough with next to zero oversight. Um, how did AIG go under in the first place? There's a reason parents don't give their children a crisp Franklin, saying "use it wisely."
I feel these execs should be set up for compensation as professional athletes “should be”. Minimal salary with the carrot of substantial monetary rewards if performance meets predetermined levels. I feel that by feeding ambition, everyone( execs, employees, shareholders, fans, etc.) wins….as long as someone is awake at the wheel and Bernie Madoffwithmymoney / Barry Bonds are not allowed to cheat in order to perform. I realize this is “Pollyanna” thinking because no one is willing to stand up to these “Masters of the Universe” and dictate terms to them. Until shareholders, taxpayers, fans demand that these few, selfish, greedy, individuals play by the terms that will provide adequate profits without the worry of today’s headlines, we as a society will be held hostage.
From what I understand, bonuses are to be awarded in the event of success, not failure. If the companies had failed, the contracts would not have been offered. Considering that the companies have failed, that they are no longer privately owned (not really), I can’t see any reason to reward failure with bonuses that should have been reserved for success to begin with, and would not have been distributed at all had it not been for the bail out.