Enough with the bonus bashing already

[BigK]

I'm sick of hearing it. So AIG is paying out another 150 million or so in bonuses. Big deal. They claim that they are contractually obligated due to compensation agreements. I believe them, and I just wish the politicians would get off their soapboxes.

Does anybody really think that a company wants to pay an employee more then the profitable portion of the revenue they bring in or the contribution they make to the enhancement of the companies profitabilities. If those employees left because they were not being paid as agreed, then the company would loose all the revenue that employee brought in plus the company's share of the profit (hopefully there's a profit otherwise the company will go out of business and the employees will all lose their jobs).

Do I think in many cases executive compensation has gotten out of hand? Yes, and these types of bonuses should receive fair scrutiny. But in the case of bonuses paid due to meeting or exceeding production levels which is common in the insurance business...shutup. Go start your own company and pay the people what you want to. If your employees don't feel fairly compensated they'll leave you for another company that does pay them what they think their worth and you'll loose the revenue they brought into your company.

By the way, The Politicians answer to increasing revenue is to increase our taxes after they've voted on some wasteful spending that does not improve the overall economy. And the Media reporting on this...when's the last time they have had to make a payroll?

[Guest Conway]

I agree with you.

In order for the companies that have accepted government bailouts to turn themselves around and repay the taxpayer, they need to be able to generate sustainable profits. Like any good company, they should be paying their best sales and management people to produce the sustainable revenues and profits to turn the company around.

If they don't, the best and the brightest will go elsewhere and their competition will be happy to pay them the incentive income that they would earn in any private company.

In the year before my most recent employer accepted TARP, they cut middle management bonuses out for the purposes of "belt tightening" with a promise that bonuses would be back in the plan the following year. As good team players, we in management all accepted that as a necessary evil. Now that they have accepted TARP, they're using it as an excuse not to pay bonuses once again as well as freeze salaries and eliminate the company's participation in our 401K.

I left January 31. It took me four weeks to find a mid six figure salary job in my field. Others, critical to P&L, have left since me. They begged me to stay. But, they weren't interested in making a counter-offer financially. Hell, I would have accepted deferred income or stock options if they had offered it.

Soon, they're only going to be left with those who cannot find work elsewhere. Losing their best and brightest who contribute substantially to the company's bottom line is not going to result in a turnaround for that company.

Hopefully, they'll be able to see the forest for the trees before its too late.

[caeron]

People are hung up on the name. That's why many companies try to talk about it as variable compensation. It's part of my pay, it's not 'bonus'. If we hit certain financial targets, it's mine, end of story. It's not "if I've been a good boy" money.

[Lucky]

Well, I don't agree at all. They took billions in bailouts. That means we, the American taxpayers, gave up for them. And now they can't give back in return? Screw them. They screwed up badly and shouldn't be rewarded.

[caeron]

Then they should be clear that they're instituting pay cuts and why. Bonus is just part of the negotiated pay structure. If you hit the numbers, you get the kicker.

For all I know, it may not be legal not to pay it. That's a retroactive pay cut.

I think paying the bank's employees is a different issue than punishing the folks that got the banks screwed up on the first place.

[Lucky]

The company that they worked for went bankrupt. Their bonuses went bye-bye. Now the nice taxpayers have stepped in to clean up their mess, maybe save their jobs, and rather than be grateful, they want money for screwing their company into bankruptcy?

[caeron]

Most of the companies that took money didn't go bankrupt. and wouldn't have. But because uncle sam is on the scene, they're supposed to not give up their pay to the corporation?

[Guest Conway]

It seems that many are finding bedding down with the government uncomfortable. Today's Wall Street Journal reports that Bank of America, Wells, and Goldman, among others, are ready to give the TARP money back. It seems that having government bureaucrats second guess your every personnel move is a bit disconcerting to them. I can understand why. I've always been of the opinion that, if you really want to fuck something up, put the bureaucracy in charge of it.

[Guest epigonos]

I find it amusing that many of the CEO's of the corporations who had their hands out for TARP money thought they could get the money without strings. They all appear to have forgotten the very, very old adage "he who pay the fiddler call the tune". They took the money and NOW they don't like the tune -- a little late I think.

[BigK]

If those companies can afford to repay the TARP money let them. AIG has a lot of assets, but if you have a fire sale on your asset you'll get fire sale prices.

I'm fine with the companies who received the TARP funds being a little uncomfortable...where I draw the line is government interference to the extent that it hurts the companies ability to recover.

President Obama is playing with fire in demonizing the AIG bonuses. What about all the pension plans, 401K's, and individuals who owned stock in AIG. Their holding are now 20% of what they once were. I'm sure they'd like nothing better then generating the revenue through profits or asset sales to pay the government back and maybe regain some of their ownership in the company.

[Guest Conway]

I find it amusing that many of the CEO's of the corporations who had their hands out for TARP money thought they could get the money without strings. They all appear to have forgotten the very, very old adage "he who pay the fiddler call the tune". They took the money and NOW they don't like the tune -- a little late I think.

With all due respect, the original TARP recipients weren't given the option of saying no to the money. They were told that they were taking it and that it was for the good of the country. Additionally, it seems that the current administration is making TARP rules as it goes and retroactively without to the original set of rules that were laid out when the original big banks were conscripted into the program.

Chuck Schumer must be sweating bullets right now. He has spent the last three years raising Wall Street money to support Democratic candidates and trying o convince business people that this is a newer, friendlier Democratic party to them.

This has to be the worst outcome that he could imagine.

[firecat691614502759]

Please! Bonuses are paid for superior work. If everything you do leads to your company either going bankrupt or accepting hand outs then you don't get paid a bonus.

Too bad the people who work for AIG have seen their stock become worthless. There are thousands of others without a paycheck who invested in AIG and lost everything because of the incompetence by the same people who want Million dollar bonuses.

GET REAL!!!!

[Guest eastburbguy]

It's a good thing there is no exchange of opinions in this thread. Otherwise Management might lock it. :-)

I'm sick of hearing it. So AIG is paying out another 150 million or so in bonuses. Big deal. They claim that they are contractually obligated due to compensation agreements. I believe them, and I just wish the politicians would get off their soapboxes.

Does anybody really think that a company wants to pay an employee more then the profitable portion of the revenue they bring in or the contribution they make to the enhancement of the companies profitabilities. If those employees left because they were not being paid as agreed, then the company would loose all the revenue that employee brought in plus the company's share of the profit (hopefully there's a profit otherwise the company will go out of business and the employees will all lose their jobs).

Do I think in many cases executive compensation has gotten out of hand? Yes, and these types of bonuses should receive fair scrutiny. But in the case of bonuses paid due to meeting or exceeding production levels which is common in the insurance business...shutup. Go start your own company and pay the people what you want to. If your employees don't feel fairly compensated they'll leave you for another company that does pay them what they think their worth and you'll loose the revenue they brought into your company.

By the way, The Politicians answer to increasing revenue is to increase our taxes after they've voted on some wasteful spending that does not improve the overall economy. And the Media reporting on this...when's the last time they have had to make a payroll?

[Guest Conway]

Please! Bonuses are paid for superior work. If everything you do leads to your company either going bankrupt or accepting hand outs then you don't get paid a bonus.

Too bad the people who work for AIG have seen their stock become worthless. There are thousands of others without a paycheck who invested in AIG and lost everything because of the incompetence by the same people who want Million dollar bonuses.

GET REAL!!!!

Since no one actually knows who received these bonuses (none have been personal;ly named in public), how can one assume that those who received them were responsible for the trades that caused the AIG meltdown. For all we know, those who received bonuses may have been responsible for very profitable portfolios there. Maybe not.

The truth is that the past administration along with Congressional Democrats, crafted a set of rules under which bonus compensation could be paid. Chris Dodd, who is now leading the charge against these bonuses was instrumental in crafting the agreement. AIG used that as the basis for the awards that they made.

This is nothing more than a case of political finger pointing that could set very dangerous precedents for years to come.

The government has no more business in someone's bank account than it does in someone's bedroom.

It is only now

[Lucky]

That's just not true, Conway. We may not have the individual names, but we are told that over $150 million of the bonuses went to those London traders who screwed up badly by insuring any junk that came across their desk.

[Guest eastburbguy]

< Since no one actually knows who received these bonuses (none have been personal;ly named in public), how can one assume that those who received them were responsible for the trades that caused the AIG meltdown. For all we know, those who received bonuses may have been responsible for very profitable portfolios there.

Actually, we DO know that those who got most of the bucks were the culprits who damn near brought the world financial system down, i.e., those in the AIG London operation. And we also know that "retention" bonuses were paid to employees who had already left AIG.

Mr. Google is helpful here:

New York Report Finds AIG Paid $1 Million Bonuses To Former Employees

The highest bonus was $6.4 million, and six other employees received more than $4 million. Fifteen other people received bonuses of more than $2 million, and 51 people received bonuses of $1 million to $2 million. Eleven of those who received “retention†bonuses of $1 million or more are no longer working at A.I.G., including one who received $4.6 million.

< For all we know, those who received bonuses may have been responsible for very profitable portfolios there.

Ummm, not so much.

Mr. Google goes on:

< The Washington Post reports:

At least 73 employees of AIG's Financial Products unit -- the London-based division of the insurance giant that sold the high-risk derivatives blamed for the company's near-collapse -- got bonuses of at least $1 million out of the $165 million pot of bonuses that was recently revealed

CNN chimes in:

As long ago as January 28, CNN did a piece on the London Unit of AIG which was slated for huge bonuses when they were those responsible for most of AIG's losses. A clip from that 1/28 piece was run on CNN tonight.

< The truth is that the past administration along with Congressional Democrats, crafted a set of rules under which bonus compensation could be paid. Chris Dodd, who is now leading the charge against these bonuses was instrumental in crafting the agreement. AIG used that as the basis for the awards that they made.

The truth is, with all due respect, quite the contrary. The initial AIG deal was done by the Fed, literally under cover of darkness during the Bush Administration last Fall, with no involvement by Congress whatsoever. Chris Dodd had nothing to do with "crafting" any AIG agreement. The Fed informed Congress after the deal was done. Whether Bush's Treas. Sec. Paulson knew is open to speculation - I believe he knew.

Conway, I respect you as a worthy conservative counter to my unabashed liberal views. I respect your right to your opinion (whether or not opinions are allowed here). If you disagree with my above recitation of what I see as The Facts, have at it. :-)

Since no one actually knows who received these bonuses (none have been personal;ly named in public), how can one assume that those who received them were responsible for the trades that caused the AIG meltdown. For all we know, those who received bonuses may have been responsible for very profitable portfolios there. Maybe not.

The truth is that the past administration along with Congressional Democrats, crafted a set of rules under which bonus compensation could be paid. Chris Dodd, who is now leading the charge against these bonuses was instrumental in crafting the agreement. AIG used that as the basis for the awards that they made.

This is nothing more than a case of political finger pointing that could set very dangerous precedents for years to come.

The government has no more business in someone's bank account than it does in someone's bedroom.

It is only now

[Guest eastburbguy]

< If we hit certain financial targets, it's mine, end of story.

So, like, if you lose billions you get your bonus because you "hit certain financial targets?"

People are hung up on the name. That's why many companies try to talk about it as variable compensation. It's part of my pay, it's not 'bonus'. If we hit certain financial targets, it's mine, end of story. It's not "if I've been a good boy" money.

[Guest eastburbguy]

< the best and the brightest will go elsewhere and their competition will be happy to pay them the incentive income that they would earn in any private company.

Robert Kuttner, a 20 year columnist for Business Week, appeared on The News Hour with Jim Lehrer this evening, and called them, "the worst and the dumbest." By what measure, pray tell, do you deem those who bet wrong on the housing bubble, assumed it would continue forever, lost hundreds of billions of dollars and damn near brought down the world financial system, "the best and the brightest?"

As for their employment possibilities outside of AIG, I congratulate you on your good fortune. It seems you are the exception to the rule in my recent experience. I personally know of hundreds if not thousands of unemployed or underemployed Wall Streeters who would kill to help untangle the AIG mess, and who would work for a fraction of their former compensation. Are many of them dummies? Sure, but don't tell me that the best of the lot is less competent than the AIG fraudsters.

I agree with you.

In order for the companies that have accepted government bailouts to turn themselves around and repay the taxpayer, they need to be able to generate sustainable profits. Like any good company, they should be paying their best sales and management people to produce the sustainable revenues and profits to turn the company around.

If they don't, the best and the brightest will go elsewhere and their competition will be happy to pay them the incentive income that they would earn in any private company.

In the year before my most recent employer accepted TARP, they cut middle management bonuses out for the purposes of "belt tightening" with a promise that bonuses would be back in the plan the following year. As good team players, we in management all accepted that as a necessary evil. Now that they have accepted TARP, they're using it as an excuse not to pay bonuses once again as well as freeze salaries and eliminate the company's participation in our 401K.

I left January 31. It took me four weeks to find a mid six figure salary job in my field. Others, critical to P&L, have left since me. They begged me to stay. But, they weren't interested in making a counter-offer financially. Hell, I would have accepted deferred income or stock options if they had offered it.

Soon, they're only going to be left with those who cannot find work elsewhere. Losing their best and brightest who contribute substantially to the company's bottom line is not going to result in a turnaround for that company.

Hopefully, they'll be able to see the forest for the trees before its too late.

[Guest Hoover42]

The $165 million in bonuses paid to people who may or may not deserve it doesn't upset me. What upsets me are the hundreds of BILLIONS of dollars of taxpayer money AIG and other companies have taken and used to pay off god knows who--some hedge fund brokers in Zurich.

I'd rather keep those billions and let the failures end up where they belong. Maybe then those hedge fund traders and managers will then be forced to learn a real skil and start producing genuine value for the world economy.

...Hoover

[caeron]

< If we hit certain financial targets, it's mine, end of story.

So, like, if you lose billions you get your bonus because you "hit certain financial targets?"

At my company no. No bonus this year, and extremely unlikely next year either. But if we hit the numbers, the company doesn't get to say "oh, changed our minds, not paying you after all."

[Guest Conway]

< Since no one actually knows who received these bonuses (none have been personal;ly named in public), how can one assume that those who received them were responsible for the trades that caused the AIG meltdown. For all we know, those who received bonuses may have been responsible for very profitable portfolios there.

Actually, we DO know that those who got most of the bucks were the culprits who damn near brought the world financial system down, i.e., those in the AIG London operation. And we also know that "retention" bonuses were paid to employees who had already left AIG.

Mr. Google is helpful here:

New York Report Finds AIG Paid $1 Million Bonuses To Former Employees

The highest bonus was $6.4 million, and six other employees received more than $4 million. Fifteen other people received bonuses of more than $2 million, and 51 people received bonuses of $1 million to $2 million. Eleven of those who received “retention†bonuses of $1 million or more are no longer working at A.I.G., including one who received $4.6 million.

< For all we know, those who received bonuses may have been responsible for very profitable portfolios there.

Ummm, not so much.

Mr. Google goes on:

< The Washington Post reports:

At least 73 employees of AIG's Financial Products unit -- the London-based division of the insurance giant that sold the high-risk derivatives blamed for the company's near-collapse -- got bonuses of at least $1 million out of the $165 million pot of bonuses that was recently revealed

CNN chimes in:

As long ago as January 28, CNN did a piece on the London Unit of AIG which was slated for huge bonuses when they were those responsible for most of AIG's losses. A clip from that 1/28 piece was run on CNN tonight.

< The truth is that the past administration along with Congressional Democrats, crafted a set of rules under which bonus compensation could be paid. Chris Dodd, who is now leading the charge against these bonuses was instrumental in crafting the agreement. AIG used that as the basis for the awards that they made.

The truth is, with all due respect, quite the contrary. The initial AIG deal was done by the Fed, literally under cover of darkness during the Bush Administration last Fall, with no involvement by Congress whatsoever. Chris Dodd had nothing to do with "crafting" any AIG agreement. The Fed informed Congress after the deal was done. Whether Bush's Treas. Sec. Paulson knew is open to speculation - I believe he knew.

Conway, I respect you as a worthy conservative counter to my unabashed liberal views. I respect your right to your opinion (whether or not opinions are allowed here). If you disagree with my above recitation of what I see as The Facts, have at it. :-)

I will give it my best shot. Specifically. we still don't know who received the bonuses. We do know what unit some of them worked in. Within that unit, I suspect that there were, and still are, very profitable traders who acted responsibly even in the greatest days of carelessness in that organization. Were these the folks who received bonuses|? Neither of us now lnow and may never know.

At the end of the day, in large financial organizations, executive management officers and boards make decisions as to how to allocate the company's assets. These are the people who are ultimately culpable for this mess. Not the traders who simply did what they were told.

In my own former organization many of us on the risk management side spoke up as we saw our share of assets invested in residential mortgages near 20%. The board of that organization wanted us to invest another 5% of the company's assets into resi. We held firmly and declined. Let me tell you that it didn't happen without us understanding very clearly that we could walk in the next day and be fired. Not everyone has a board as open to criticism as ours was.

Blaming the traders for this debacle is like blaming an infantryman for the debacle in Vietnam.

Our collective anger as a nation is misdirected and our politicians are forcing business to make personnel decisions based upon that misdirected national anger. The only organizations that are going to be hurt by that strategy are those that the government has already pumped billions of taxpayer dollars into to save. In essence, those organizations will now become class b corporate citizens unable to attract the best and brightest that they need to return to profitablity and pay the government back.

Management based upon emotion is a bad thing and that's what this while scenario represents.

[BigK]

I watched the hearings today. These were retention bonuses for traders who manage specific books of business. These were the dreaded derivatives. These compensation contracts were entered into in late 2007 and early 2008. At that point these derivatives were on the company books at 2.7 Trillion Dollars. That has been reduced to 1.6 Trillion. So 1.1 Trillion of liabilities are off the books improving the financial health of the company (who must not be named). Once a book of business within the unit is eliminated so is the need for that trader. That's why 11 employees who've left the company have been paid bonuses.

Ben Bernanke at the Fed knew about these bonuses and he has been the lead contact with it who must not be named. The White House was aware of the bonuses weeks ago. Sen Dodd put legislation in the stimulus package which protected theses bonuses.

Were these compensation contracts appropriate in their level of compensation? And answer that question with the circumstances that existed 16 or so months ago. How many can speak with experience in the management of 2.7 Trillion in liabilities? I think these executives were probably over compensated as most on wall street are. But these were the contracts that were entered into. It who must not be mentioned is trying to move forward and realize the greatest value on its assets so the bailout money can be paid back.

We own 80% of it who must not be named. Shouldn't we want it/need it to succeed? These hearing may have succeeded in sending the message to the greedy out there to curb their greed during these down economic times, but I have no respect for the politicians who were largely grandstanding hypocrites.

[caeron]

Interesting resignation letter from one of the folks getting a big bonus. Apparently, he was working for an annual salary of $1 and the bonus. He reiterates the point that the people getting these bonuses had nothing to do with screwing the company up in the first place.

http://www.nytimes.com/2009/03/25/opinion/25desantis.html?em

[Guest EXPAT]

My biggest concern in all of this mess is the lack of Board of Directors oversight. In a free market, I applaud anyone who can negotiate a great compensation package. Those people should not be criticized in my opinion. However, the judgement of the executives and boards of directors that approve such plans shows that they don't practice much common judgement or oversight. I know personally of many examples of where CEO's are doing strange things using assets of a publicly traded company that is shameful and yet the boards are allowing it to continue. The primary responsibility of a CEO and Board of Directors are to provide a return to the shareholders in the most efficient way possible. The excesses that continue to be demonstrated is shameful and I put the blame or responsibility right back on the Board of Directors where the oversight begins and ends or at least it should.

[BigK]

Good point Expat. The CEO and Board certainly got fooled into thinking that there was limited downside when considering compensation packages. Much of this compensation has become overly bloated when the Economy was going well with the rising tide. It's time for all compensation agreements in the financial services sector to come under renewed scrutiny.