Saturday, March 21, 2009

The Cow Is Out Of The Barn

Everybody whose panties are in a wad over AIG bonuses need to slow down. If that was their pay plan Ol' BC's understanding is only the courts can amend or negate contracts. Not the executive branch. Not the legislative branch. If your job was, say, to meet a goal in new life or health policies and you met it you would expect the bonus to be paid. If you agreed that after a time certain with the company a bonus would be paid and you met it, you would expect to be paid. If the government wanted to beat these guys and gals out of their bonuses, they should have attached the strings up front when handing over billions of taxpayer money. They had their chance and apparently ol' Senator Dodd (he of big money from Fannie fame) slipped in that it was alright to pay them.

It looks like Oblahma is going to overstep his authority and try to take charge of compensation in the private sector.

The new rules will cover all financial institutions, including those not now
covered by any pay rules because they are not receiving federal bailout money.
Officials say the rules could also be applied more broadly to publicly traded
companies, which already report about some executive pay practices to the
Securities and Exchange Commission.

Nothing good can come of this. Well run companies don't need goverment meddling. Look how inefficient government run entities are and have been throughout history. Poorly run companies need to change or fade away or be absorbed. Government meddling isn't going to help. Pretty soon they will be asking A-Rod for part of his $250 million in compensation because he plays games in stadiums that were built with public money. And on and on and on.

Just an observation.


At 9:24 AM, Anonymous Anonymous said...

I actually agree. Not to mention that these gestures are purely symbolic in nature. The amount of money given to the bigwigs at AIG was less than 1% of the total bail out money they received.


At 9:25 PM, Blogger Ol' BC said...


At 10:34 AM, Anonymous Vincent said...

"Well run companies don't need goverment meddling."

That is not a true statement. Without government "meddling" we would have too many externalities, such as pollution. Without government controls, well-run companies would devestate our air, land and water resources - all while turning a heck of a profit.

Also, one should consider that American car companies are (if not going out of business) shifting most of their manufacturing overseas, claiming they cannot pay high American wages to remain profitable, while Japanese car manufacturers are shifting their factories here. They LOVE paying American wages and are doing so profitably. What is one difference? The range between the lowest paid worker and the highest paid executive is relatively small, not the giant gulf between the overpaid American executives.

I am on the fence about CEO pay caps, as it may harm the incentive to work, but on the other hand, companies that try to raise everyone's salaries instead of just the big wigs tend to do better. There are some good arguments on both sides of this fence.

However, in this case, the outcry against AIGs bonuses is indeed misplaced.


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