AIG uses bailout money to pay employees.

[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.

[madmax]

Originally Posted by UGAalum94

I'm stunned that no one tried to safeguard against paying bonuses with tax dollars for pretty spectacular business failure.
.

You mean Obama?

[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.

[ASTalumna06]

I watched Obama on Leno tonight, and he indicated that if these AIG employees were not paid immediately, they would be able to sue for three times the amount established in their contracts.

I understand that AIG has been involved with some shady business practices, but assuming this is true, it might have been in their best interest to simply pay these employees now, rather than potentially get caught up in several complicated legal battles.

[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.

[RU OX Alum]

a 90% tax on anything is bs. Actually, its beyond BS. I'm pretty sure it was one of the reasons that lead to us declaring our independence.

I hate congress. AIG bonuses are the new baseball steroids.

[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.

[madmax]

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.

Hank Greenberg the former AIG CEO, was on the Early Show this morning. He said AIG did not have retention bonuses when he was CEO. He said bonuses were a reward for performance.

If things have changed the that shows what idiots are running AIG.
Who gives bonuses to someone that sucked at their job? Their arguement is, they have to give retention bonuses or the execs will leave. If they sucked then who cares if they leave? Where are they going to go, Bear Stearns, Lehman, Merril Lynch or maybe Enron?

[ASTalumna06]

Originally Posted by RU OX Alum

a 90% tax on anything is bs. Actually, its beyond BS. I'm pretty sure it was one of the reasons that lead to us declaring our independence.

I hate congress. AIG bonuses are the new baseball steroids.

I found it interesting that Leno also talked to Obama about this. He basically asked, "If the Congress can decide to tax 90% on these bonuses, what's stopping them from thinking 'Hey, I don't like that group, let's tax them this much..'" Naturally, Obama kind of danced around the question, and then started talking about changes in tax policy, steady progress and long-term economic growth.

I know I wouldn't want to be stuck answering that question on a late night talk show.