Should The AIG Bonuses Be Taken Away Or Not?
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.
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?
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?
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'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.