Show me the Money.....

It’s probably safe to assume that most people reading this are currently in no danger of having their multi-million dollar salaries or bonuses rescinded or renegotiated by the government. It is, however, an interesting and, to say the least, controversial question and issue. What to do about the employees of companies like AIG which have accepted billions and billions of dollars from the government and, in AIG’s case, are now 80% owned by the government?

On the one hand, these are legally negotiated and signed contracts guaranteeing the employees certain salaries and benefits. The purpose of the contracts were to reward the employees for outstanding performance, and to protect the employees from the arbitrary whims of management which could result in the lose of these salaries and benefits. These contracts were all legally negotiated in good faith last year before the proverbial shit hit the fan. This was “business as usual”.

On the other hand, of course, today is no longer “business as usual”. “Business as usual” is making money the old fashioned way: earning it through sales and good investments, and generating profits from which bonuses and rewards are paid. The moment a company goes to the government and asks for and accepts money to stay in business, it can be said that “business as usual” stops. There is then a whole new game plan, a whole new business plan. At that point, it can be argued, it is totally fair to re-examine and renegotiate any and all existing agreements. Besides, the whole purpose behind bonuses is to reward outstanding performance, and AIG, and it’s employees, lost over $62 billion in just the fourth quarter of last year. That is certainly outstanding performance, but not in the usual, good sense of the term!

Andrew Ross Sorkin, a columnist for the New York Times, had a whole different, if not scarier, spin on the issue in the Times today. According to his reasoning, we need to pay the salaries and the bonuses to keep the employees right where they are. “AIG built this bomb, and it may be the only outfit that really knows how to defuse it.”

“AIG employees”, he explained, “concocted complex derivatives that then wormed their way through the global financial system. If they leave—the buzz on Wall Street is that some have, and more are ready to—they might simply turn around and trade against AIG’s book. Why not? They know how bad it is. They built it. So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company.”

What do you think?