Congress Passes Bill To Tax AIG Bonuses!

[Zorrofan]

Eric et al

 

This is the way I see it. The whole AIG bonus issue is a prime example of what is wrong with corporate America today. I have no doubt that AIG is filled with many hard working, ordinary Americans. But I am highly sceptical that they are going to see any of this bonus money. Instead it goes to upper management, the same people who put AIG in the position of needing a taxpayer funded bailout.

You say you are mad that sand is being kicked in the face of Wells Fargo. Well, I am mad that corporate America seems to think it is okay to pay themselves huge bonuses for poor or mediocre performance (at best) while the shareholders get little or nothing in the way of dividends or share performance.  A few years ago WEB wrote in his annual letter about excessive executive compensation. To me this whole AIG debacle is a prime example of excessive compensation. Kick sand in the face of Wells Fargo, to me this incident is kicking sand in the face of every shareholder in America.  There are retention bonuses being paid to people who have already left AIG! This is fair or reasonable? Yes, I agree people should be compensated for the job they do but today it seems we read of executive after executive being paid tens of millions in bonuses, stock options and God knows what else while the stock performance of their company does nothing.  How about company layoffs while I renovate my office for $1.5 million? Not AIG but a prime example of the lack of accountability at the top. I see the integrity the WEB, CM and Prem demonstrate and ask why it is so hard to find examples of that today.

 

I don’t want to argue, make this personal, or even pretend that I have all of the answers. Executive compensation is a sore point with me. No doubt Congrees is doing some grandstanding but there is a bigger issue here. We need to look at Executive Compensation and realize that it comes out of the pockets of ordinary shareholders. The AIG issue is one of taxpayers pockets being used, but in other cases it is shareholders who are footing the bill.

 

I have said my piece and won’t post on this topic any more.

 

Cheers

Zorro

 

[Guest ericopoly]

Eric et al

I see the integrity the WEB, CM and Prem demonstrate and ask why it is so hard to find examples of that today.

Cheers

Zorro

 

 

I see that with Gates/Ballmer as well.  Neither of those guys ever took a stock option.  However, they did see the importance of pay and stock options to keep employees from wandering to another company who is offering them millions to leave.

 

I see that importance too.  Think of it like a nuclear arms race.  Golden handcuffs serve as a deterrent, but it leads to an escalating war.  The war escalated... and many of the key executives they wanted to retain would have walked to another company if their millions were taken away.

 

Professional sports has the same problem.  What, pay a guy $100m to throw a ball through a hoop?

[GaliPart]

I happen to disagree with the way that Congress is going about getting the bonuses back.  There were opportunities to address this without changing the tax code; while it is true that the executive branch really botched their oversight on this one, this is an issue which should have been resolved in other ways.  We are talking about a $14 trillion economy, and Congress is focusing on passing laws that penalize a handful of people?  I can certainly think of better things for them to do. 

 

I am also afraid of the unintended consequences of this.  First, it applies to all companies accepting money more than $5 billion, including some (like WFC) that didn't even want to take the funds.  Second, they are giving all institutions that took TARP money a significant incentive to pay back the funds quickly--resulting in shrinking their balance sheets and cutting back further on lending--just the opposite of what we want them to be doing.  Third, they are retroactively changing the rules (again), giving people additional reason to hesitate before taking government funds (or even trusting the government to follow through with the programs that it says it will implement). 

 

We'll see what ends up happening with the Senate, but I do agree with the assessment of Mike O'Rourke (the chief market strategist of BTIG) that "this is nothing more than a short sighted, knee-jerk reaction to popular opinion which demonstrates that Congress is missing the forest (the economy) for the trees (bonuses) and the worst part is that the forest is on fire."