Taxing of bonuses

You are probably aware of the public furor about AIG’s numerous million dollar bonuses paid out even after the Company received public monies, yes? You are also probably aware of the fact that Congress passed legislation that would tax these bonuses up to 90%. Am I right?

It will be very curious to see the ramifications of this choice by Congress. My guess is that the financial markets will suffer a big sell off on Monday as investors generally have a knee-jerk reaction to perceived “government interference.” My own personal opinion is that capitalism is both about feast and famine. These executives were only too happy to reap the rewards during the fat years of their businesses successes. But that comes with a flipside, too. They also must deal with the lean years, too.

The outrage expressed by various business leaders goes to my point in several earlier postings about businesses needing to remember to earn business from consumers and not just try and trick us or manipulate us or sneak-one-by us. The same argument is applicable to bonuses. They are earned for good choices, not for doing hard work that is the result of bad choices. Duh! The argument being made by AIG, Bank of America and others is that without the bonuses they cannot retain the talent necessary to see them through the tough times. This is clearly disconnected from the reality of the situation. It’s like this…imagine if you hired a company to come in and do work on your house, say build an addition, and you offered the company a bonus if they got the work done well and in a timely fashion. Now imagine they do the work and you award them the bonus. Now imagine that the structure collapses and that they will not work to rebuild the structure because they need an additional bonus to compensate for the difficulty of the rebuild.

The fact is that these bonuses were awarded without any guarantees being made on the part of the employees with regard to quality work having been done. Shoddy work does not earn a bonus of any kind in any other business. The fact that the financial markets went all haywire and crazy is not an excuse because the markets responded this way in part because of those poor choices by these executives. So they need to stay on board to make sure that the ultimate product that they have made is sound and no more bonuses need to be awarded. This is simply fair and ethical business practice, right? Do these people have no pride? Jesus.

Jason