AIG Bonuses: Who Cares?

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Members of Congress, particularly those of the Democratic party, have been making a huge deal lately about the $165 million in bonuses paid out by AIG this year to high-earning employees.  Congress seems so opposed to this, in fact, that they’ve introduced a bill to tax those bonuses at a nearly 90% tax rate.  And many irate Americans seem to be jumping on the bandwagon, deeming it “unfair” for these employees to be receiving any bonus at all after the company has received more than $150 billion in bailout money.  To these people, I say “mind your own business.”

AIG’s Payroll Is None Of Your Business

As I see it, Congress’s justification for taxing AIG bonuses into oblivion rests on an entirely faulty premise:  that those currently receiving these bonuses are the ones responsible for causing the mess to begin with.  It doesn’t take much thought to expose the ridiculousness of this assumption, however.

• Such bonuses are usually performance-based – If a particular trader or executive really had screwed up royally and lost the firm billions of dollars, do you think they’d still be employed?  Of course not, and this goes for the CEO (who was replaced, remember) down to the lowliest of employees.
• Shareholders are paying the bonuses, not tax-payers – Zealots might first balk at this statement, saying “Wait a minute.  These bonuses are being paid out of our bailout money!”  First off, that’s not true.  The bonuses are being paid out of cash flow for performance objectives that have already been achieved (i.e. profits).  The bailout money is being used for to prop up capital ratios, not pay bonuses.
• If you cut wages, the best and brightest will go elsewhere – In the midst of a crisis, you want the best and brightest at the helm.  Stop paying them and they’ll follow the money elsewhere.  If you doubt this will happen, I can only assume you’re living in a dream land.

And even if they are partly responsible and did make mistakes, who are we to tell them they don’t deserve payment for doing their jobs faithfully, however incompetently?  Have you always performed your job perfectly without making any mistakes?  I know I haven’t.  Of course not.  You’ve made plenty of mistakes and guess what, you still got paid.

If I worked for AIG and received a bonus, I wouldn’t return it.  I would simply say “that’s not my problem” and go about my business.

Now look, you’ve gone and made me use HTML-like tags…

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