Tuesday, March 17, 2009

AIG Bonuses - What's the Alternative?

Andrew Ross Sorkin of the New York Times (via Yahoo.finance) suggests that attempts to get back the $165 million in executive bonuses at AIG may result in worse consequences than just letting it go and learning from it:
That may strike many people as a bit of convenient legalese, but maybe there is something to it. If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right.

As much as we might want to void those A.I.G. pay contracts, Pearl Meyer, a compensation consultant at Steven Hall & Partners, says it would put American business on a worse slippery slope than it already is. Business agreements of other companies that have taken taxpayer money might fall into question. Even companies that have not turned to Washington might seize the opportunity to break inconvenient contracts.

It's an interesting take, and I'm not sure it's not a valid one, considering the current "competance deficit" the current administration is increasingly accused of. When every other day one of them is doing or saying things to send the stock market into another slide, what would saying "the government will decide which of your contracts you will keep or break" do to the system?

I understand America's irritation, and I understand Obama's need to be seen doing something about it, but quite frankly, we have over $1 Trillion out there for the purpose of stimulating the economy. I'd rather me make sure that is used wisely and supervised. Don't step over a dollar to pick up a dime. Since he's not able to focus on everything happening right now, focus on the economy as a whole and let someone else worry about getting back that %.0001 that AIG potentially misused.

Focus, Barry!


Dan Stratton said...

I think you will see this sort of activity among businesses if the administration persists. There are a lot of contracts people want to get out of. Allowing it on one side will release someone on another. But, doing so will only confirm the distrust the average American consumer has with their supplier. They will continue to shift to the smaller, more trustworthy company they can look in the eye.

Thom said...

And this is one of the main reasons why the government should stay out of business. They create unexpected consequences more often than not. In trying to inject ethics into business they could very well end up creating even more unethical behavior.

The sad thing is that 98% of business are not at fault here. They've been playing by the rules, but are paying the price for the bad eggs who weren't caught because they've been bribing the government to look the other way.