Wednesday, March 18, 2009

Economic Fiascos

Like everyone else, I've been outraged by the AIG bonus story. The more I read about it, the more angry I get. As I commented over at 11D, I used to work on a bonus structure. I know what a bonus is for and it's not for failure. In our scheme, you got a bonus if you personally had good sales, but you got significantly more if the company did well overall. This eliminated much of the competition and we were inclined to help each other out. And I'm not the only one who's worked under such conditions--waitresses and salespeople of all stripes function under a compensation plan that rewards better service and hard work more than it does poor service and less work. So it makes no sense to most people that people get rewarded for failure, either their own or the company's. There were certainly times when I personally did very well, but the compay didn't and so my bonus reflected that (an additional company bonus was on the order of 5-10 times what an individual bonus was--usually something like $50 or $100 compared to $500; we weren't getting millions).

Tim Burke writes quite cogently about the backlash against the outrage, registering a complaint similar to the one I'm making above--that is, that one is in line for bonuses because one takes certain risks that when they pay off, monetary awards accrue and when they don't, too bad so sad. He makes two other arguments, one against the idea that we're too far removed to be able to judge and so we should just be quiet and one against the idea that these guys are jumping ship for greener pastures (to mix my metaphors). The gall of, in this case conservatives, arguing that we should just let the professionals do their jobs, strikes me as paternalistic at best and to me, goes against the idea of a democracy. Hello. We own most of AIG. We have a right to make complaints. Anyone who thinks otherwise wants a different kind of government.

And I agree with Tim that many of these former employees must not look too good to future employers. I'm thinking that their ability to find a job at all is difficult. Although I also think the financial industry tends to have a short memory to go with their shortsightedness, so that in 6 months or a year, these people will be right back in it, bonus structure in tact.

I don't know that I want a witch hunt whereby the names of these people are plastered all over the newspapers and the Internet, but I do think there should be more accountability than just subtracting the bonus amounts from our latest loan to AIG. Part of me thinks that we shouldn't loan them anything, just let them fail. Then there will be no arguing about bonuses. The articles below have more, including the little tidbit that the bonuses now amount to $450 million. Yippee.

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