AIG uses bailout money to pay employees.

[KSig RC]

The thing is, these "bonuses" are usually a guaranteed part of compensation in firms like these - usually with a "bonus minimum" with the ability to go above that due to earnings.

This isn't a "reward" - even if the guys sucked, this is how it works in that field.

[AKA_Monet]

Originally Posted by KSig RC

The thing is, these "bonuses" are usually a guaranteed part of compensation in firms like these - usually with a "bonus minimum" with the ability to go above that due to earnings.

This isn't a "reward" - even if the guys sucked, this is how it works in that field.

Just wondering, how does one negotiate a contract like that? I mean seriously, I could use a bonus like that right now.

[Coramoor]

Wait....there are people bitching about 165 million dollars paid in bonuses when somewhere in the range of 65 billion dollars of AIG's bailout money when overseas?

Yeah, that makes sense. Who signed off on the bailout with these clauses included? BO's current Sec. of Treasury, the guy that can't remember to pay his taxes.

[Kevin]

Originally Posted by KSig RC

The thing is, these "bonuses" are usually a guaranteed part of compensation in firms like these - usually with a "bonus minimum" with the ability to go above that due to earnings.

This isn't a "reward" - even if the guys sucked, this is how it works in that field.

Yep.

And as far as Congress trying to require these guys to give their bonuses back, they can't do that because they can't impair the obligations of contract.

As far as trying to tax it at 90%, it's arguable they can't do that either. IMHO, that sort of confiscatory, punitive taxing policy amounts to nothing more than a taking. Heck... in places like NY where the state income tax is >10%, many executives would actually have to pay more in taxes than they were obligated to receive!

This is utterly ridiculous. It's grandstanding at its worst.

[Coramoor]

Originally Posted by Kevin

Yep.

And as far as Congress trying to require these guys to give their bonuses back, they can't do that because they can't impair the obligations of contract.

As far as trying to tax it at 90%, it's arguable they can't do that either. IMHO, that sort of confiscatory, punitive taxing policy amounts to nothing more than a taking. Heck... in places like NY where the state income tax is >10%, many executives would actually have to pay more in taxes than they were obligated to receive!

This is utterly ridiculous. It's grandstanding at its worst.

Yep, especially when you look at the names of the congressmen that received contributions from AIG...

It's sickening.

[ASTalumna06]

Originally Posted by KSig RC

The thing is, these "bonuses" are usually a guaranteed part of compensation in firms like these - usually with a "bonus minimum" with the ability to go above that due to earnings.

This isn't a "reward" - even if the guys sucked, this is how it works in that field.

Originally Posted by Kevin

Yep.

And as far as Congress trying to require these guys to give their bonuses back, they can't do that because they can't impair the obligations of contract.

As far as trying to tax it at 90%, it's arguable they can't do that either. IMHO, that sort of confiscatory, punitive taxing policy amounts to nothing more than a taking. Heck... in places like NY where the state income tax is >10%, many executives would actually have to pay more in taxes than they were obligated to receive!

This is utterly ridiculous. It's grandstanding at its worst.

Exactly. Obama has said that he will look into the legal ramifications behind distributing these bonuses. But there are none. As long as these employees were under a contract that deemed these bonuses as a required form of payment/salary, they are entitled to them. Whether or not the company was run into the ground doesn't matter. The government, out of desperation, handed them a check without stipulations. They can't now say, "Oh, wait a minute.. we didn't say you could spend the money on THAT.."

Don't get me wrong... it's frastrating as hell. But such is life.

[UGAalum94]

Originally Posted by KSig RC

The thing is, these "bonuses" are usually a guaranteed part of compensation in firms like these - usually with a "bonus minimum" with the ability to go above that due to earnings.

This isn't a "reward" - even if the guys sucked, this is how it works in that field.

I apologize for not knowing how the bonus structure worked.

It still doesn't seem unreasonable that someone with knowledge of how things worked in the field couldn't have attached stipulations to their receiving the money.

Maybe the companies could have renegotiated contracts with their employees. Surely the employees couldn't have expected the contracts to be honored in bankruptcy, and we're we lead to believe that was what was looming for them if they didn't get the money, right?

Maybe you are right and the employees could have sued for breach of contract, but it seems kind of unlikely under the circumstances.

ETA: who expects to keep drawing the same salary when the company is on the verge of going under?

[ASTalumna06]

Originally Posted by UGAalum94

I apologize for not knowing how the bonus structure worked.

It still doesn't seem unreasonable that someone with knowledge of how things worked in the field couldn't have attached stipulations to their receiving the money.

Maybe the companies could have renegotiated contracts with their employees. Surely the employees couldn't have expected the contracts to be honored in bankruptcy, and we're we lead to believe that was what was looming for them if they didn't get the money, right?

Maybe you are right and the employees could have sued for breach of contract, but it seems kind of unlikely under the circumstances.

ETA: who expects to keep drawing the same salary when the company is on the verge of going under?

The problem isn't with the COMPANY installing stipulations. The problem is with the GOVERNMENT implementing them. If they were to say, "We will bail you out, but none of this money may be used for paying bonuses or outrageous expenditures," then they would be limited in where the money could be spent.

You said, "Sure the employees couldn't have expected the contracts to be honored in bankruptcy..." But AIG never filed for bankruptcy. And you can't preemptively dismiss someone's contract because you MIGHT file for bankruptcy.

[UGAalum94]

Originally Posted by ASTalumna06

The problem isn't with the COMPANY installing stipulations. The problem is with the GOVERNMENT implementing them. If they were to say, "We will bail you out, but none of this money may be used for paying bonuses or outrageous expenditures," then they would be limited in where the money could be spent.

You said, "Sure the employees couldn't have expected the contracts to be honored in bankruptcy..." But AIG never filed for bankruptcy. And you can't preemptively dismiss someone's contract because you MIGHT file for bankruptcy.

It's too late now. I agree. My point in my most recent post was that it might have been possible for someone in the government to make the company agree to these terms before they authorized the bailout money. In turn, the company could have renegotiated with the employees.

I think you could probably compel people to accept a renegotiation of their contracts if they honestly believed that the company wouldn't get funding if the bonuses were still in the contracts and that without the funding, they'd go under. Sure, a couple of people might have insisted on the original contracts, but I'd feel better about the whole thing has it been attempted. (ETA: I'm laughing at my standard here. Guys, it's not about the national economy or government assistance to private incompetent industry. It's about my feelings. I think what I intend to imply is that I'd have greater faith in the government's ability to do a damn thing about the economy generally had they indicated more foresight about how the money would be spent, have they done a better job explaining standard payroll in this industry like you have, or had they just not given the companies the money.)

As someone who makes less than 100,000 dollars, I have a hard time understanding why anyone would get 600,000+ in additional pay called a "bonus" in a year when the company's performance sucked this bad.

[Kevin]

Originally Posted by UGAalum94

Maybe you are right and the employees could have sued for breach of contract, but it seems kind of unlikely under the circumstances.

You've got to be kidding me.

Someone is under contract to pay you $1 million and they decide not to pay you... Maybe you're some sort of saint or something, but I'm betting you hire the best lawyer you know and tell her to sic 'em.

[UGAalum94]

Originally Posted by Kevin

You've got to be kidding me.

Someone is under contract to pay you $1 million and they decide not to pay you... Maybe you're some sort of saint or something, but I'm betting you hire the best lawyer you know and tell her to sic 'em.

Not if you honestly believe that you'll bankrupt the company if you try to take the money. Would you rather get your bonus this year or a have a job next year in this economy?

I think there's a measure of self-interest in renegotiating the contracts.

But as I said, I agree it's probably too late now.

I think there are a lot of industries where you see people taking pay cuts to keep companies solvent. It doesn't seem that unreasonable.

[KSigkid]

Originally Posted by UGAalum94

Not if you honestly believe that you'll bankrupt the company if you try to take the money. Would you rather get your bonus this year or a have a job next year in this economy?

I think there's a measure of self-interest in renegotiating the contracts.

But as I said, I agree it's probably too late now.

I think there are a lot of industries where you see people taking pay cuts to keep companies solvent. It doesn't seem that unreasonable.

In the grand scheme of things, a bunch of people collecting bonuses that they initially negotiated for as part of their contract isn't going to bankrupt the economy.

[Kevin]

Originally Posted by UGAalum94

Not if you honestly believe that you'll bankrupt the company if you try to take the money. Would you rather get your bonus this year or a have a job next year in this economy?

I doubt an AIG exec is going to have a very lucrative 2010, so I think I'd still sue. The company's troubles are none of my concern. I'd figure there's a good chance AIG is going under anyhow and if that occurs, I'll never see a penny of that money they owe me.

As you've seen, the bonuses are hardly a blip on the radar screen in the grand scheme of things. We're only talking about like $170 million when there are many billions at issue.

So no, taking a bonus is not going to mean an individual is choosing between AIG not existing anymore or him getting paid. Your example has no foundation in reality.

[Munchkin03]

Originally Posted by Kevin

I doubt an AIG exec is going to have a very lucrative 2010, so I think I'd still sue. The company's troubles are none of my concern. I'd figure there's a good chance AIG is going under anyhow and if that occurs, I'll never see a penny of that money they owe me.

As you've seen, the bonuses are hardly a blip on the radar screen in the grand scheme of things. We're only talking about like $170 million when there are many billions at issue.

So no, taking a bonus is not going to mean an individual is choosing between AIG not existing anymore or him getting paid. Your example has no foundation in reality.

I foresee lawsuits. Not many, since in some cases the legal fees may end up being more than the bonus, but enough.

The tax and the apologies, in my opinion, are more of a response to the populist rage than to a real administrative objection to the bonuses. The term "bonus" is misleading anyway--it's not always performance-based, especially in law or finance.

[UGAalum94]

Originally Posted by Kevin

I doubt an AIG exec is going to have a very lucrative 2010, so I think I'd still sue. The company's troubles are none of my concern. I'd figure there's a good chance AIG is going under anyhow and if that occurs, I'll never see a penny of that money they owe me.

As you've seen, the bonuses are hardly a blip on the radar screen in the grand scheme of things. We're only talking about like $170 million when there are many billions at issue.

So no, taking a bonus is not going to mean an individual is choosing between AIG not existing anymore or him getting paid. Your example has no foundation in reality.

You're kind of missing my point. I'm not talking about where we are now; I was suggesting how this could have been handled differently to prevent this issue.

We were told that AIG going under would be catastrophic for the entire financial sector. We were told that they would go under without government funds. The company turned to the government for funds. Those funds could have been tied to AIG changing the terms for bonuses, had the same people in congress who claim to be outraged today actually been concerned with what AIG would do with the money.

Under those circumstances, since you'd have had zero guarantee of getting your bonus anyway since the company was, we were to believe, on the brink of bankruptcy, you probably wouldn't sue. What would it get you? The hastening of the company going under? I seriously doubt the AIG contracts stipulate that employees would be paid bonuses even if the company is entirely insolvent, and if they do, it makes you wonder how they stayed in business as long as they did.

I agree with you that if you are looking for examples of potential government economic screw ups, we've got some doozies right now that eclipse the bonuses. I also agree with you that I don't think punitive taxes on the bonuses are the way to handle it.

ETA: Is no one else facing changes in employment terms because of the state of the economy? I know I am.

And delusional as Kevin finds my idea, I'm apparently not alone:
http://www.cnn.com/2009/POLITICS/03/19/aig.contracts/

And, AIG's trouble would have been none of my concern had they not gotten a big influx of cash from the government. I suppose I'm culpable because I did vote for Bush in 2004. I'm not sure it makes any sense at all to give money to private companies with no expectations about how the money will be used, especially considering the conditions under which they approached the government.