Huge Bonuses for Executives Receiving Government Money
By ParaTed2k
@ParaTed2k (22940)
Sheboygan, Wisconsin
March 17, 2009 12:33pm CST
At first glance, this issue would seem to be a simple one. Why should executives of companies receiving "bail outs" get huge bonuses? But when you sit and think about it... it's not so simple. There actually are good points on both sides of the issue.
Like it or not, these executive bonuses are part of a contract. In other words, if the executives kept their side of the contract, the company is legally required to pay them. If they don't pay the bonuses, the executive has every right to sue the company, costing he company much more money because then they would be liable for legal fees AND paying the bonuses.
What would happen if the same company refused to pay labor according to their contract? Contracts with labor aren't any more sacred or binding than contracts with executives. I doubt any of the people screaming for the heads of the companies giving out the bonuses would accept the same breach of contract for labor.
Speaking of labor, it brings us to a legitimate argument on the other side. While the companies don't seem to be breaking labor contracts outright, they are trying to renegotiate them, or at least using the current financial problems of the company as leverage to reduce the pay and benefits of labor.
If these executives are hoping to be able to reduce the cost of making payroll, they can't really justify bonuses for executives. Especially when each bonus is often more than what they hope to save through reduced pay and benefits for labor.
The purpose of the Boards of Directors is to make decisions for the company. No one else has the authority or righ to do it. Stockholders have their say during votes and through buying and selling of stocks, but the day to day running of the company isn't up to them. Unions only have the say the contract allows, so they aren't in any position to tell the Directors how to run the company. The government only has (legal and ethical) say in regulatory and public safety issues. In other words, the Directors are in their right to decide what to do with any company assets... including the bail outs and TARP money.
But the House and Senate do have the authority to set the terms of taxpayer money given to anyone. They have the Constitutional "power of the purse", which not only allows them to allocate revenue, but audit and challenge the misuse of it.
All of these are legitimate points, so it's not as simple as one might think.
3 people like this
10 responses
@xfahctor (14118)
• Lancaster, New Hampshire
18 Mar 09
As disgusting and repulsive as it is that they recieved this money, we are unfortunatly stuck with the situation. The problem lies at core constitutional issues (not like they care about that anyways) and some things forbidden by it. The federal government cannot force the breech of a legal contract between two partiesm it is forbidden. The other solution that was tossed in as a solution was to essentialy retor tax the bonuses, but again, theres a major constitutional clash at play. They should have thought of this before they pushed that unconstitutional piece of trash in the first place (tarp), they all voted for it, they knew whatwas in there and they did it anyway.
My other problem with this is them griping about those bonuses is all lip service, it isn't genuine. If it was genuine, they would be screaming about the money that went to over seas bank from AIG and other baiout recipiants and other even bigger outrages totaling in the hundreds of billions. Obama and Dodd are up thjere playing "the peoples party" by railing against some legal contracted bonuses totaling in the millions and nothing else. It is a ploy and only the foolish should or would fall for it. I don't buy it for a minute, I see right through that bullsh**.
2 people like this
@ParaTed2k (22940)
• Sheboygan, Wisconsin
18 Mar 09
Exactly! All if this is proof that there is more to it than "bailing out" anyone. The Marxist in our government want controlling interest in as much of the private sector as possible.
1 person likes this
@irishidid (8687)
• United States
17 Mar 09
AIG and all the others should have been allowed to take Chapter 11. We wouldn't be going through all this right now and they would have been on the way to recovery instead of this constant begging for more money.
1 person likes this
@ParaTed2k (22940)
• Sheboygan, Wisconsin
18 Mar 09
Exactly, under chapter 11 all contracts would go under review and no one would be guaranteed a bonus.
1 person likes this
@irishidid (8687)
• United States
18 Mar 09
We're paying attention to the wrong thing. If the government steps in and messes with their contract every last contract written is worthless. The constitution protects us from this happening.
http://www.youtube.com/watch?v=rWbKKydgj_o
1 person likes this
@Taskr36 (13963)
• United States
18 Mar 09
Well this is just another example of exactly how stupid and poorly thought out this bailout crap is. It should have been done slowly and deliberately to avoid this kind of crap. There should have been restructuring of contracts REQUIRED before any bailout money was given.
Restructuring a contract is legal, legitimate, and happens all the time. However, there must be an agreement on both sides. There is absolutely no reason for the executives to agree to lose their bonuses now. Well, they could do it for the good of the compa... *bursts out laughing*.
Either way, they're playing Monday morning quarterback with the bailout bill which all these morons foolishly voted for.
1 person likes this
@ParaTed2k (22940)
• Sheboygan, Wisconsin
18 Mar 09
True, which is exactly how it would be if the government would just butt out.
1 person likes this
@deejean06 (1952)
• United States
17 Mar 09
It's not a simple and easy answer. I understand that the public is upset they have a little bit of knowledge about the inner workings of one company. The problem is we never see the whole picture. We only see a glimpse. I agree that it's frustrating that people are getting huge bonuses on the taxpayers' dime. But if that were the case then maybe we'll learn our lesson and not bail out anything anymore...
@ParaTed2k (22940)
• Sheboygan, Wisconsin
17 Mar 09
We only see what the incompentent press wants us to see, and since they are taking their marching orders from the criminal Rahm Emanuel, it's no wonder we get more anti business propaganda than facts.
@scheng1 (24649)
• Singapore
18 Mar 09
The structure of the benefits and compensations system need an overhaul. Executives should not get cash bonus when company is not doing well. They should get shares in lieu of cash. In this case, they will work hard to make money for the company.
Once the company recovers in term of profitability and the market recovers, they will gain more in capital gain by selling their shares.
In cases like this, those executives are doing nothing more than begging the government for money to pay themselves. At least vampire sucks blood from a person at a time, these executives managed to suck the money of so many taxpayers.
@ParaTed2k (22940)
• Sheboygan, Wisconsin
18 Mar 09
But shouldn't the people who did accomplish the terms of the bonuses get what they earned?
@ParaTed2k (22940)
• Sheboygan, Wisconsin
18 Mar 09
But what if the terms of the contract were not tied to over all success?
What you are saying is, contracts should only be honored when the company feels like honoring them.
@scheng1 (24649)
• Singapore
18 Mar 09
If they really did their work well, especially in risk control and risk assessment, the company will not need to ask government for money.
For the rank and file, a simple mistake that results in a few thousand dollars loss will likely result in termination. Why should executives be any different?
Ultimately all salaried staff are to make money for the company, that's the most basic term of employment.
I can't imagine what outstanding contribution the executives have made when the company nearly bankrupt.
@bbtort (47)
• Singapore
18 Mar 09
at a time when every country is in financial crisis, AIG being a global company should have been more prudent and cautious in giving out bonuses during this period.
Yes, executives should be given bonus for work done. However, this is applicable only when times are good, company is making a profit. How can AIG justify the bonus payout when the money was not from their profits but from a government bailout?
It was an erroneous judgement call from AIG.
@ParaTed2k (22940)
• Sheboygan, Wisconsin
18 Mar 09
So you're saying that companies should only honor contracts when they feel like it?
@ParaTed2k (22940)
• Sheboygan, Wisconsin
18 Mar 09
But was there a contract guaranteeing you a bonus? Or were bonuses merely benefits offered by the company. Benefits can be changed at will, but terms of contracts are harder to get out of.
@bbtort (47)
• Singapore
18 Mar 09
Nope. That's not what I meant. My apologies if my post was misleading.
In all employment contracts, bonus is not a must. It is usually tied to company's profitability for the year. Well, at least this is the case for Singapore. I'm not too sure about other countries.
Just to share, I worked for a casino cruise company for more than a year. However, cae year end and we were told the company did not make any money and due to the economic downturn all employess will not be getting any bonus. But under the law there's nothing we can do. Even if we know the company is making money. Whoever heard of casino operators losing money through operations?
@ladyluna (7004)
• United States
17 Mar 09
Frankly ParaTed, I'm stunned that our governmental represetatives on the highest level, are publicly working to undermine one of the fundamental basics of the civilized world -- contract law.
I find it dangerous, at best, to foment public sentiment away from the tradition of honoring contractual agreements.
Never mind the fact that the boneheaded "stimulus" bill contained a provision submitted by Chris Dodd, which exempted all bonuses contracted before 2/11/2009. Now I realize that no one had sufficient time to thoroughly study the content of the bills that have been passed since the inauguration. But if little, ol me knows about Chris Dodd's provision, shouldn't an entire White House staff and division of the US Government known as "The Treasury Department" have been able to find out that the Congress just eliminated ALL legal options that Obama promised Geithner would pursue??? 
"Senator Dodd said that this provision of the law became effective on February 17, 2009. In his view, the say on pay provision would not apply to preliminary, ... These standards include restrictions on bonuses,"
jimhamiltonblog.blogspot.com/2009_02_01_archive.html
http://business.cch.com/securitiesLaw/news/StimulusTitleVII(3).pdf
Geeze, if the left hand ever figured out what the right hand was doing, we might just be able to dig ourselves outa' this rabbit hole!
'Course, is ignorance really the issue here? Or is this latest move out of the populist playbook designed to distract the angry yammering of us little guys?
"Senator Dodd said that this provision of the law became effective on February 17, 2009. In his view, the say on pay provision would not apply to preliminary, ... These standards include restrictions on bonuses,"
jimhamiltonblog.blogspot.com/2009_02_01_archive.html
http://business.cch.com/securitiesLaw/news/StimulusTitleVII(3).pdf
Geeze, if the left hand ever figured out what the right hand was doing, we might just be able to dig ourselves outa' this rabbit hole!
'Course, is ignorance really the issue here? Or is this latest move out of the populist playbook designed to distract the angry yammering of us little guys?
@ParaTed2k (22940)
• Sheboygan, Wisconsin
17 Mar 09
Obama said it himself, he has put capitalism on notice. He is just continuing the war on capitalism he joined in college... or even before.
1 person likes this
@marty3888 (2355)
• Acme, Michigan
18 Mar 09
Here's the thing. AIG said they came up with with the bonus program to get the best salespeople. They had to get a specific number of sales to get those trips. I understand that. Kirby does that. If you sell so many Kirby vacuums 3 months in a row, you got to go on a free vacation. One was a trip to Aruba, one I really wanted, but couldn't sell enough. So if these people sold enough insurance policies to earn those bonus's or trips, therefore bringing revenue into the cdompany, why do they need the bailout money?
@dalyme3 (88)
• Philippines
18 Mar 09
the points you have made are very legit, it is true that in certain contracts specified that if a certain department was able to perform very good are deserving of such bonuses but however it seems quite doubtful that AIG or any other companies actually may also have gone overboard with the bonuses since not all executives are deserving of such compensation. Perhaps that is why our lawmakers were trying to make a point that if your company has done no good at all and it leads to its downfall, then there must be some discrepancies. It is good that there is an ongoing investigation. It will eventually come out which and who are really deserving of such bonuses.
@buggles64 (2709)
• United States
17 Mar 09
If what you say is true, than you are right it is not that simple. A bonus though is something on top of what an executive has done. If the executives were doing their job, and fullfilling their contract, how come the banks are in the mess that they are in. I'm not playing devil's advocate here, I am just curious as to what your opinion is.
I have also heard that while many of these executives are receiving these bonuses they won't be keeping them because of "taxes." I am anxious to see how all of this is going to play out in the months to come.
@ParaTed2k (22940)
• Sheboygan, Wisconsin
17 Mar 09
Bonuses usually aren't about the overall performance of the company. They are usually more specific to the responsibilities of the person getting them. Say you are in charge of the department that buys raw materials for the widgets your company makes. In your contract there are bonuses for increasing the quality of the raw materials your department brings in, while decreasing the overall cost. The rest of your company might be in the red, but if you satisfied the terms of the bonus, then the company is legally bound to pay it.
I don't know why there is a controverty over bonuses. The IRS already taxes bonuses differently than regular pay. There's no reason these bonuses should be taxed differently than any other bonus.
@flowerchilde (12529)
• United States
18 Mar 09
We keep hearing about how the companies messed up, but what we need to hear more of is how Congress contributed.. For instance with AIG being insurance for loans Congress strong armed banks into giving which were not good loans (as we've heard). So when those loans fell through, trouble for AIG.. (and banks). It may be nice to think all people should be able to own a home (and furnish it and put in a pool at the same time?) but that is an idealism and not compatible with the no nonsense of business. Charity is a separate issue and cannot be enforcibly weaved into business ventures.
