Look, can we get over all this gnashing of teeth and tearing of hair about the bonuses at AIG? It is not productive and threatens our economic recovery.
Yes, it stinks that AIG is paying out $165 million in bonuses to the boys (and girls?) whose activities brought their company not only to its knees, but into government ownership (80 percent). Barney Frank screams his outrage. President Obama says it is about values.
Okay. But a key value in business is keeping your word. An important business activity is signing contracts, and then honoring them. A deal is a deal.
Or nobody will do business with you.
There may be a whole slew of good reasons why those bonuses should be paid. There are many reasons why it may hurt to do so. Read the letter from AIG CEO Edward M. Liddy to Treasury Secretary Timothy F. Geithner (read it here). He didn't like it either.
But the bottom line is that contracts need to be honored.
Now that the government owns most of AIG, the last thing it should do is destroy the company. But that will be the result if government runs the business like government, instead of like a business.
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2 comments:
People are outraged because this is outrageous — an affront to any sense of natural justice.
What kind of contract is that, where you get your bonus for driving your company into a giant, smoking crater? These people are so divorced from anything an honest man would recognize as reality that Lewis Carroll would blush.
The evidence is overwhelming that AIG knew the derivatives they were insuring were crap. We have socialized risk to a point where there is no accountability and this bonus BS is more of the same.
"a key value in business is keeping your word. An important business activity is signing contracts, and then honoring them. A deal is a deal.
"Or nobody will do business with you."
Oh, please. This isn't about keeping your word; it's about sharing the loot. Our loot. This whole bailout mess is extortion — shovel the risk over to the public; they'll bail us out because we're too big to fail.
I, for one, am sick of seeing bastards loot and run amok, seeking every possible loophole to exploit and then hiding behind the rule of law. The word "honor" doesn't belong in any sentence involving these clowns. The word "contract" only in the Godfather sense of the word.
Expressions of outrage may be the only recourse we have, since "contracts need to be honored." A sense of outrage may be the only impetus there is for meaningful reform. If we're so jaded and cynical that we can't feel outrage and act upon it, we'll be right back where we are now in a few years.
"Just get over it" is neither morally satisfying, nor is it good public policy.
It may indeed be outrageous. Agreed. But violating contracts as "redress," in effect creating a second wrong to put it right, carries far more risk than the potential benefit.
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