Should The AIG Bonuses Be Taken Away Or Not?

by Carlos Portocarrero on 24 March 2009 37 comments
Photo: Wad of cash

Everyone's making a huge stink about the $165 million in AIG bonuses that were recently paid out. It seems everyone is trying to figure out a way to take that money away from the people that were meant to receive them. The latest idea is to tax the bonuses at a 90% rate, which basically reduces them to nothing. Or for reference—closer to my bonus (just kidding, day job!).

But it doesn't look like it's going to happen. There are some legalities involved with taxing a specific group of people like this. As in, it's probably not cool. As a Biden economist says:

I think the president would be concerned that this bill may have some problems in going too far — the House bill may go too far in terms of some — some legal issues, constitutional validity, using the tax code to surgically punish a small group.

Why is the government looking into such drastic ways to take these people's money away? It's simple: we're all angry when we see a company that's getting bailed out paying out huge bonuses to the very people we believe put them in that mess. And we want payback.

Laying Blame

It's understandable to be upset, but is it right? Should these people have their bonuses taken away when they were contractually obligated to receive them? And if somehow they were taken away, why would these (presumably great) employees stay at the company? Why wouldn't they all take off, leaving AIG devoid of all the good talent that's left?

AIG could do several things here. They could encourage the employees to return the bonuses, or a portion of the bonus, like ING has done. Or the execs that are getting paid could volunteer to return all or a portion of the money. After all, who wants to be known as the guy who took a fat check when the company was tanking faster than ARod's reputation?

Right?

Think About It

Think about this long and hard before you answer because it brings up a very important point.

Would you return your bonus if your employer was involved in something that put it in crisis mode?

ARTICLE CONTINUES BELOW

What if you had absolutely nothing to do with it though? Part of AIG's business (insurance) is a great company and does great work. What if you were an outstanding employee that brought millions of dollars of revenue to the company thanks to your hard, honest work? Would you still think about returning your bonus?

I wouldn't.

I'd keep it. I'd save it, especially these days. Or maybe I'd go to Paris for a month until it all blew over. I earned it.

My wife and I were having this conversation the other day and we couldn't agree. She felt that AIG employees shouldn't keep the bonuses—that it was unconscionable when the company is getting bailed out and tumbling faster than a 14-year-old Chinese gymnast. But when I asked if she would accept responsibility if her own company faced something similar, even if she did nothing wrong, she had to think about it.

And that's what I want people to do. Think a little bit harder about it before joining the millions of people calling for the heads of the AIG bonus babies. Not all of these people messed up. These  bonuses were in their contract, so if you want to be upset then direct it at the people who wrote the contract (AIG). The law says AIG has to pay them. Taking the money away by taxing them at 90% is probably illegal, especially when it's being done simply to satisfy the angry mobs out there.

For a more detailed analysis on the AIG story, check out Michael Lewis' article about it—he's one of the few people writing about the "other side" of this story (he's also my hero, btw).

Now if you don't mind, I have to go submit my resume for a new position over at AIG: fall guy. The pay is OK but I hear the bonuses are pretty sweet.

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Guest's picture
Guest

The bonuses are "only" some hundereds of million of dollars. The bank bail-out is growing to over a trillion. I am more angry that Goldman Sachs received billions of dollars from its contract with AIG when AIG was factually bankcrupt and only survived on government support. As you wrote, some people in AIG original insurance business might have done excellent work in 2008 and deserve some bonus - an argument more to break up AIG into good units and the rotten rest. The good units could pay their bonuses without public interference.

Guest's picture
Peter T

To the legal argument:
> These bonuses were in their contract, so if you want to be upset then direct it at the people who wrote the contract (AIG). The law says AIG has to pay them.

The law says also that a bankcrupt company cannot pay bonuses without consent of the bankcruptcy judge, and AIG is in a kind of bankcruptcy, as a ward of the state. Without government billions, it would be definitely bankcrupt and there would be no money for bonuses.

> Taking the money away by taxing them at 90% is probably illegal, especially when it's being done simply to satisfy the angry mobs out there.

It's a law by congress, therefore it can be only illegal on procedural or constitutional grounds. The latter is up to the Supreme Court to decide. Any talks about "angry mobs out there" is as unimportant for legality as "greedy bankers in there", as long as the mobs are not actually outside of congress, prohibiting free deliberations. Fear of the voters, on the other hand, is no ground to dismiss a law. Payment of campaign contributions to congresspeople from banks has never been ground to dismiss a law.

To the ethics: Considering that AIG is a ward of the state, congress should feel free to decide what is best for the whole economy, not AIG executives.

Guest's picture
Guest

Peter T. -- Being in a "kind of" bankruptcy is not the same thing as being in bankruptcy as far as the law is concerned. It is either in bankruptcy or it is not. AIG is not even in receivership -- it is therefore subject to no government oversight.

Punative taxation is unconstitutional. That's a well-settled area of law.

If instead of crafting this reactionary bailout the government would have grown a pair and attached some rules and regulations to those billions of dollars they were throwing over the side of the inaugural floats at these failing businesses, we wouldn't be in a tizzy about these bonuses right now -- they would not have been paid.

We cannot now pile more bad law on top of the bailout.

Well, I suppose anything is possible right now, huh?

I'll just say that this is yet another unwise move.

Xin Lu's picture
Xin Lu

I think this "Bonusgate" is just another distraction from the bigger picture.  It is also hilarious how the Democrats were trying to outdo the Republicans on their anger on this issue.  Like the first commenter said, $165 million is a drop in the bucket of how much the current government is doling out.  People should really be angry at the new trillion dollar toxic asset plan proposed by Obama and the treasury.

Guest's picture
Diana Shotko

I'm glad there's someone else that pointed this out! This "bonusgate" is all smoke and mirrors to hide the truth behind the curtain.

For those unfamiliar with the toxic asset agenda, the government is going to print $1 TRILLION DOLLARS (or $1,000,000,000,000) to monetize our debts. In other words, they're printing our currency to pay off our debts with our own money! No country has ever done this successfully. In time, this will make the US dollar WORTHLESS!

If we don't take a stand, we'll be going the way of Zimbabwe or the former U.S.S.R.: paying for a loaf of bread with a wheelbarrow of money.

http://www.the912project.com

Guest's picture

There is no chance in hell I'm returning the bonus if I'm in their shoes. I'm keeping it, staashing it away. If Congress wants to come after me, they can have it back, but otherwise it's my money. And I'm gonna spend it on a pony!

-Nate

Guest's picture
Amber

but it seems to me that a contractually obligated "bonus" is actually a *salary*. Why AIG doesn't just pay the people more up front is likely a tax issue, but if you sign a contract for $100 dollars and $50 of it comes at the end of the job, you expect to get your $50.

Why a "bonus" isn't tied to job performance is beyond me (and beyond my wildest salary dreams).

The public response is both predicable and pathetic. Seems we get more intense if we have a group of people to focus on and don't do so great at being "outraged" at something as nebulous as a "bailout." Then we're just complainers.

Guest's picture
Charles Anderson

Kind of like loaning some money to a friend, then getting mad about how they spend it. Or more like, your broke sibling complaining about how they spent it.

We gave (or allowed to be given) money to AIG. They will do what they do.

Lets move on, there are other big fish to fry.

Guest's picture
Jeff

Taxing the bonuses is the wrong way to get them back, we all know that. Doesn't the Government now have a majority ownership on the board of AIG? Doesn't that mean Congress can break AIG's end of the contract?

And as much as I agree the initial bailouts were poorly done, it has nothing to do with balls. Unless you mean golden balls. Some banks spent $114 million dollars[1] lobbying congress in 2008, receiving $295 billion in federal aid. It wasn't reaction, it was reciprocation. I wish I could make investments that good.

[1]: reuters

Guest's picture
vanderleun

The attempt to tax it back is called a "Bill of Attainder."

We fought a revolution, started a country, and wrote a Constitution over that among other issues. Within that document we find:

Article I, Section 9, paragraph 3 provides that: "No Bill of Attainder or ex post facto Law will be passed."

Strange that congress cannot find the same provision.

Guest's picture
Peter T

> Punative taxation is unconstitutional. That's a well-settled area of law.

Then the legal question is: Is this punitive taxation? An argument can be made that the law extends to all companies that receive bail-out moiney, not just AIG, and that any comnpany can avoid falling under the law by paying back the bail-out money (in a reasonable time). The emotions leading to the law should not play a role in this deliberation, as little as banker's campaign contributions to politicians.

Anyway, as I wrote above, the AIG money is not my big concern but the planned trillion dollar bail-out of the banks, by guaranteeing their bad assets. Congress should demand public hearings on the plan, because the guarantees and non-recourse loans amount to a public grant that only congress is allowed to make, not the Treasury and not the Fed. Speaking much more about the AIG bail-out provides a convinient cover for Geithner's new plan, which is essentially a second Hank Paulson plan of give-aways to protect their prime constituency, the financial sector. That can happen if you choose the secretary of the Treasury from bankers all the time. It's time to end that tradition.

Philip Brewer's picture

It's always dangerous to encourage the government to change the rules after the fact--it's the sort of thing that comes back to bite you later.

What this indicates, though, is that we need a better set of rules:

  1. We need better rules for winding up very large financial institutions that have gone bust.  Currently the rules are such that putting them into bankruptcy threatens the whole financial system, as we saw with Lehman Brothers.  This prompts the government to do something that's sort of but not exactly bankruptcy, producing this sort of ambiguous situation.
  2. We need better rules for dealing with bonuses paid out on the basis of financial results that turn out to be wrong or misleading.  (That is, the bonuses that we ought to be going after are not so much the ones being paid this year; we ought to be clawing back the bonuses paid in 2005, 2006, and 2007 when AIG and other large financial firms were being run into the ground by greedy idiots who got paid huge sums for taking gigantic bets that didn't blow up until after the bonus check cleared.  If we had rules like that, the people running the company would have very different incentives when it came to betting the company.)

Having said all that, I'm kind of okay with the government changing the rules and taxing bonuses paid by firms that have been bailed out.  It'll bring in a bit of extra revenue, it produces a reasonable result (people who work for firms that would be bust if it weren't for government bailouts don't get big bonuses), and it teaches people to be careful about trusting the government when large amounts of money are involved--always a good lesson.

Guest's picture
jarebear

I know the media doesn't help with this in the way they report the numbers, but AIG recieved around $170 Billion, gave "bonuses" totaling $165 Million. (which, correctly noted by Amber is actually a kind of a misnomer).

To say that correctly, it's $170,000 Million and $165 Million.

That means the bonuses actually made up a bit less than 0.1% of the bailout money. (That's 1/1000).

To understand this in numbers that makes sense to us normal folk, that's like if i bailed out your company with $170,000 and your boss paid out $165 in bonuses to you and your colleagues.

So, don't you think this reaction is entirely, gee... disproportionate? In fact, in the face of the true cost of economic recovery failure, isn't this reaction actually insanely stupid? Shouldn't we all be angry that our congressmen are wasting more than a week on trying to recover less than 1/1000 of the money sent to ONE institution, which makes up less than less than 1% of all the recovery money we're spending anyway???

Paul Michael's picture

AIG was upfront about the bonus structure before the bailout money was given them, and they are not bonus payments in the traditional sense of the word. They are indeed more like salary payments. Sure, the people getting these payments earn way more than most of us, but that's a dangerous game to play. If you earn twice what your neighbor does, does that mean you should have some of your salary taken away? Salary that you were counting on. This is a smokescreen, pure and simple. We're all getting fired up over this and the nation is trillions of dollars in debt. Why get so worked up over a tiny drop in the ocean?

Guest's picture
Rhonda

And if we let them go bankrupt, do they get their bonuses? I guess I'm not with you here. It seems like the same kind of creative accounting that got us into this mess to start with. Not just with AIG, but with any company that can show losses yet have ceo's or others get bonuses. Maybe too big to fail is just too damn big to start with, and part of too big is being able to float all this b.s. because it's just "too complicated".

Guest's picture
Gimble

Funny how AIG wants to hid behind contractual obligations, but the automakers were forced to rescind on their contractual obligations to their union workers.

http://www.businessrockford.com/archive/x82782143/Sources-UAW-deal-cuts-...

Of course the government made the mistake of not spelling out the rules before hand, so now they have to live with the consequences. Some times the appearance of impropriety is as important as whether or not any thing inappropriate actually occurred.

For example our superintendent of schools just received a a $75k bonus, a week before announcing that they are cutting back on teachers due to lack of funds. Does he have to give back that money, no. Should he? It would pay the annual salary for two teachers.

I would and I would if I was one of the AIG execs. Building goodwill towards their company is part of the function of being at the top, it helps insure that you have business next year. Part of my retirement funds is invested through AIG and I have been strongly considering pulling that money even though I would take a hit financially to do so.

Guest's picture
Guest

What a silly argument. For all intents and purposes, AIG went bankrupt last summer. Had the government not intervened, all those "good employees," would have received no bonus... so why should they receive one now at the taxpayer's expense?
(The preceding was not a legal argument)
From a more legal standpoint, I believe the law will stand. Retroactive taxes have been Constitutionally upheld, and by wording the legislation to include any company that receives more than $5 billion in bailout money, it should apply to enough people that it is not considered a punitive tax. Harvard law professor Laurence Tribe says it should be considered Constitutional.

Carlos Portocarrero's picture

@Gimble: Good analogy there, that's a great point and I totally agree. Those contracts to autoworkers were what was drowning them and so they needed to be addressed.

Here's my problem: AIG is an insurance company (as the President reminded us tonight). A very good one at that. Do we know whether the executives that are getting these bonuses (some of them are returning them already) were from the profitable, insurance part of the business? If so, do they deserve to be punished like this? 

I don't know, maybe I'm not being consistent, but all this outrage just doesn't make sense to me.

And by the way, I loved how President Obama answered that nonsensical question about why he didn't come out on TV to complain about the AIG bonuses right away.

"Because I like to know what I'm talking about before I speak."

Awesome.

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Guest's picture

I love this post and kudos for writing it. My husband and I have been having the exact same disagreement.

I think it's funny how everyone thinks the receivers of these bonuses should give the money back. It's always easy to give away someone else's money isn't it? I think more people need to put themselves in the shoes of these employees, not the big CEOs, but the little worker bees at the bottom of the totem pole. I don't think many people in that same situation would honestly give away their hard earned money.

Guest's picture
Bucky

@WC Porter

"Those contracts to autoworkers were what was drowning them..."

Ummmmm. NO.

That's just GOP talking point bullshit. The actual hourly wage differential between the Big Three and foreign competition southern plants is inconsequential to the price of an auto.

Big 3 are actually cheaper in price, mostly.

The problem for Detroit is that they've been selling inferior product for decades. They completely and consistently misread the market.

Unions aren't the problem, management is.

To the bigger issue of the bonus payouts ... if I got (won) one, I wouldn't give it back. That would be stupid. But there is no reason to pay them in the first place. Yes, AIG has a contractual obligation to pay. But contracts get broken every day (see: union autoworker contracts). Contract disputes happen all the time. In fact, AIG has refused to pay their contractualy obligated bonus payments to employees for years because of performance issues. And I think we can all agree this is a huge effing performance issue.

So don't pay and let the injured parties sue. Let's all go to court and see how a jury of our peers feels about the bonus payout issue.

Heh.

Guest's picture
Bucky

@One Frugal Girl

You seem to be confused about he bonus issue. Have you been paying ANY attention to this?

"I think more people need to put themselves in the shoes of these employees, not the big CEOs, but the little worker bees at the bottom of the totem pole."

Frugal G, the little worker bees aren't getting the million dollar bonus checks and the little worker bees aren't in danger of losing any "bonus" they might get.

I'd recommend a Google search perhaps, to read up on the facts. It's been covered in most every newspaper of record. http://www.google.com just in case you don't know how to do a Google search.

I'm sure that you and your hubby have been having a disagreement over this. He might actually be dealing with facts, while you are obviously confused. But then, he married you.

Guest's picture
guest

Theer is a resignation letter from an AIG honcho who will not be giving his million dollar bonus back, instead giving it all to charity.

Guest's picture
najt

>It's simple: we're all angry when we see a company that's >getting bailed out paying out huge bonuses to the very people >we believe put them in that mess.

It is simple. People who made mistakes - consciously or not - should take responsibility i.e. get fired or "punished" in some other way e.g. should get their pay docked or whatever seems appropriate. That's the basic law of the free market economy - those who make mistakes fall behind those who do not. It's not the other way out...

>Should these people have their bonuses taken away when they >were contractually obligated to receive them?

No one may be obligated to receive benefits. You may be entitled to it but as far as I know you cannot be obligated to it. The company is obligated to pay, not the CEO's to receive them, or are they ?

>And if somehow they were taken away, why would these >(presumably great) employees stay at the company? Why wouldn't >they all take off, leaving AIG devoid of all the good talent >that's left?

If those good talents got the company in a difficult situation in the first place, should they be still considered worth keeping ?

>Part of AIG's business (insurance) is a great company and does >great work.

Well made point. The company should distinguish between effective and ineffective employees. If the ineffective group is being paid large bonuses it may be branded as an action detrimental to the company's health and as such is punishable under U.S. law, isn't it (I'm not an U.S. citizen, so I don't know for sure)?

>These bonuses were in their contract, so if you want to be >upset then direct it at the people who wrote the contract
>(AIG). The law says AIG has to pay them.

Yes, the people who drafted contracts that award certain people bonuses regardless of their financial results (while managing company) are to blame.

As there is not simple answer to your question I would say that the company owners should try to question the validity of the aforementioned contracts in court. If the court determines that the contracts are invalid or faulty in some respect the owners would gain a legal argument in the dispute and a legal basis for taking another legal action in order to take away the bonuses from people who didn't deserve them.

Another question is how the U.S. government secured it's aid. When providing money for a company to bail it out, it should state some conditions regarding inteded use of this money, right ?

Carlos Portocarrero's picture

@Bucky You don't think those legacy costs had anything to do with the Big three failing? Come on, giving in to those kinds of terms is crazy.

But back to the subject at hand, let me make one thing perfectly clear: of course I believe that the ones who caused this problem shouldn't get bonuses. But the whole point is that AIG is a great insurance company. Those great employees that had nothing to do with the derivative side of things shouldn't be punished.

Right?

Or should they because their company is in trouble and did bad things? If I was a top dog at AIG's insurance dept. I would take my bonus and definitely not give it back. I earned it.

As for the ones giving it back, we'll never know if they were the "good," "the bad," or "the really bad."

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Guest's picture
lucille

All of these big banks are having the same issues, new executive office suites, new planes, big bonuses. No business that fails so horribly that the govt. has to come in and rescue them should be purchasing new assets or paying bonuses. AIG could and should have renegotiated those contracts just like the auto makers did theirs. Yes, AIG isn't the only one doing this. The others we bailed out have been doing the exact same thing but just didn't get the media attention. There is way too much nepotism between these big banks, the fed and Congress. A blanket policy stopping the excesses needs to be there, trying to go back and tax it was more stupidity.

Guest's picture

These AIG bonuses were disgraceful, but not surprising.

Catherine Shaffer's picture

You know what makes me mad about the bonus situation? I worked for a Fortune 500 company during a time when they made record breaking profits. It was $11 billion in one year, if I'm not mistaken, and I was part of the team of "foot soldiers" that helped them make those profits. The employment contract read that bonuses would be paid "as business conditions permit." What actually happened was that management got bonuses and the little guys like me got coffee table books. We have a really sick corporate culture in this country. I actually heard an AIG representative refer to the people receiving bonuses as "talent" and he insisted that the bonuses were necessary to "retain" the talent before they get hired away. (Presumably, there are other global insurance companies on other planets whose economies have not been destroyed that are eager for this kind of "talent.")

As long as we insist on believing that corporate execs are supermen and -women with extraordinary powers, they will continue to be paid obscene salaries. We all need to GET OUR HEADS back and let it be known that if a senior-senior-senior vice president is at the helm of the ship when it sinks, NO, he does not get a big bonus while he is riding the coast guard helicopter to shore. It is QED a proved fact that these people did NOT do "excellent" work last year because they contributed to a crash of the world economy. Each and every one of those "talented" execs could be replaced by at least ten other people who could do the job just as well and are currently working in banks and accounting firms for sane salaries.

To answer the question, hell yes I would give the bonus back, even if I felt i was not directly to blame for the company's problems. It is ridiculous and shameful to accept such a large bonus at a time when people are living in their cars because of my company's actions. And remember, these guys are rich already. It's not as if they are choosing to give up shoes for their children. They might have to sell that fourth vacation home, but they'll be okay. Should the government take that money back? Sure. If they can. AIG is basically owned by the government, now, so why not?

 

Catherine Shaffer

Wise Bread Contributor 

Julie Rains's picture

My understanding is that the bonuses are being paid to the derivatives' traders (who may already have annual salaries of $500k+)  not the insurance folks, and that internal obligations were being honored but not external commitments (which were critical to sustaining the global financial system). 

Guest's picture
Bucky

Legacy costs are a part of the Big Three's problems, it's true.

And they have legacy costs because, you know, they've had a very successful business here for many, many decades. All those foreign companies don't have legacy costs -- yet -- because they are relatively new to the US market.

But the legacy costs are a problem now only because the Big Three decided that instead of setting aside some the money they made decades ago when times were good to pay for future contractual obligations to their workers, they'd rather give big fat bonus checks to the executives and dividends to the shareholders.

In fact, major corporations like the Big Three spent many millions to buy legislation from congress that made it legal to steal from retirement accounts.

So boo-fucking-hoo for their complaints about legacy costs. They have legacy costs because they were very successful for most of the last century.

You also wrote: "If I was a top dog at AIG's insurance dept. I would take my bonus and definitely not give it back. I earned it."

For the record, there isn't a single executive at any major corporation in American that has "earned" the millions of dollars they make. Not saying they don't work hard, but just that they are vastly overvalued for their efforts. Their ratio of compensation to contribution is way out of whack.

Carlos Portocarrero's picture

Here is one AIG’s letter of resignation that was published in the New York Times yesterday. Worth a look as he addresses some of the stuff that we’re all commenting about.

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Guest's picture
sd

Catherine (#27) is right. Corporate culture in the U.S. is totally f-ed up. It's a delusion of grandeur for a Chief Officer of a company to think he/she deserves compensation equivalent to $5,000-10,000 *per hour* -- even if times are *good*. That kind of income is made only on the backs of the hundreds or thousands of people who are doing real work in the organization.

Yet we tolerate companies which keep overpaying their officers while they lay off people who've spent 20-30 years at the company. We seek out to hire executives (*cough* Bob Nardelli *cough*) who ran their companies down and still left with millions. We believe it when we're told that this kind of pay is necessary because otherwise the organization won't be able to keep that kind of talent. Look around -- how many jobs are there which would pay $5,000 an hour? Especially to lose buckets of money and capital? Damn few, I'll bet. So where are these hot shots going to go? Strange how the officers at huge companies like Toyota and Sony and Nokia and Bosch, with headquarters outside the U.S., don't stand up on pedestals and proclaim that they won't work until they're paid what Vikram Pandit and Carly Fiorina have been paid.

And it's ironic that these same "heads-I-win-tails-I-win" clowns have convinced American workers that "pay for performance" is the only fair way to compensate people.

They're fools, but we're chumps for going along with this nonsense.

Guest's picture
bjs1109

Totally with the "pay for performance" thing. After all, it's what we non-execs manage with, right? If one of us f***ed up that bad, a bonus would be out of the question. We'd be lucky if we still had a job, and a second chance to do better.

So I say, if it's good enough for us, it's good enough for them. The unit(s) that tanked the company, and pretty near took the economy with it, should go. The 'contractual bonuses' come into play only as long as they're still at the company. So fire their incompetent asses.

Why would you pay a bonus to 'retain' such 'skilled, knowledgeable, results-getting' asswipes? They failed. Epically. Let them go, maybe then you can hire someone who might be able to do the job.....

Carlos Portocarrero's picture

Totally agree that compensation is messed up. The problem? Corporate boards aren't doing their job, they're just taking their easy paycheck and OKing everything that came across their desk.

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Philip Brewer's picture

Kind of beside the point of these bonuses in particular, but the fact is that Incentive plans always go awry.  As soon as you tie your bonus to a metric that's supposed to measure performance you're going to get people doing the wrong thing--in particular, doing whatever it takes to get the bonus instead of what needs to be done.

Carlos Portocarrero's picture

@Philip

Incentive plans always go bad because they aren't set up properly. It's like giving your kids some money for bringing home good grades. They might cheat to get those grades, and that means you've picked the wrong thing to incentivize.

But if these systems were set up properly—then it might work. It's tough to incentivize something that employees/your kids might game you on, but it's possible.

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Guest's picture

I don't understand your main argument that the bonuses are ok if they were given to employees in profitable areas of the company.

Last time I checked, a company's profit and share price were the sum total of all the parts of the company. If the company is bankrupt then everyone suffers - there is no credit given for your work at that point.

If a player on the World Series losing team had a great series - do they still win a bit of the championship?

Carlos Portocarrero's picture

@Four Pillars

I like the World Series analogy, but I think it's a little bit flawed. Let's say a player has a contract to make $3 million dollars this year but the team has a horrible season and they wind up in last place, forcing the owner to go into debt to pay the salaries. Should the player give that money up?

An even better analogy is the one I was discussing with my wife: let's say you had a clause in your contract at work that said if you achieved this impossible goal, you'd be rewarded. And you work your tail off for a year or more and manage to achieve it. Great job! But then word comes down that Bob over in the other building messed up. Big time. So the company is still going to pay you your bonus. Would you feel compelled to give it back? And to go even further, how would you feel about the government forcing you to return the money?

I'd love to hear your feelings on that scenario.

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