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Trevor Stone's Journal
Those who can, do. The rest hyperlink.
Bone{head,us} 
20th-Mar-2009 06:15 pm
bad decision dinosaur
There's been a lot of media noise in the past week or so about over $160 million in "bonuses" paid to employees of AIG, a company the U.S. government has recently spent close to $200 billion to prop up. Many of those bonuses went to employees of the Financial Products division, "the guys who got us into this mess in the first place."

Most people's reaction, hearing it phrased like that, goes something like "What the fuck? Those greedy banker fuckwads have some nerve, throwing big piles of taxpayer money on bonuses for people whose performance was dismal?!?!?!?!?!?" President Obama expressed outrage and said his staff would look into all legal routes of getting that money back. AIG's counter was "We were contractually obligated to give those bonuses."

Now, in my lexicon, "bonus" implies that it's contingent on something. At work, we all get a bonus at the end of the year if our division meets certain earnings goals; if we the division doesn't meet those goals, we don't get bonuses. In the past I've also gotten a performance bonus where my boss said "I think these employees did a great job this year, they should get a special reward." In both cases, "bonus" means "It might not happen, but if it does, you get extra cash."

The $160 million in question at AIG turns out to be from an arrangement where they didn't expect much opportunities for traders to make profitable trades, so they set up their 2008 employment contracts to apply the 2007 bonus in 2008 as well. This is more or less equivalent to a car dealer telling his sales team "I don't expect us to sell many cars next month, but I don't want you to quit, so you can have the same commission next month as you had last month." At that point, I don't think of it as a "bonus" but as a "salary." I'm not sure to what extent AIG was in control of the story as it broke, but using the term "bonus" when the thing under discussion is more like a "salary" doesn't really help the discussion.

This is not to say that AIG's payment structure is a good one, that their employees deserve that much money, or that they shouldn't have renegotiated the employment contracts when the company nearly collapsed, taking the global economy with it. It's just important to understand what's going on and to have the finesse to be outraged about the right issues.
And 0.002 dollars will NEVER equal 0.002 cents.
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