Thursday, March 19, 2009

What To Do About AIG


Today, Congress passed a law basically taxing back the bonuses that AIG gave to people even though they received taxpayer bailout money.   While I understand that Americans want to see some justice, and believe me when I say I agree that these bonuses are completely inappropriate, I am not sure that this was the best way to go about this.

When I first heard about these bonus payments, I was as outraged as any other American.  I could not understand how any company would agree to pay millions in bonus money to peole who basically ran the company into the ground.  How is that fair?  At first, I thought they needed to block the payments.  But when it came out that they needed to pay it due to contractual law (I still question how this got into a contract) I relented since I do believe in the sanctity of contracts.

I then thought about this tax solution, and I liked it at first.  Strange I know considering how much I hate the tax code but I really did want to see some fairness.  But after I thought about it, I just do not like it.  The precedence it sets is completely wrong.  I do not like punitive tax laws.  While I do believe it is justified here, I believe it can be used as one of those things that is extended to other, less warranted, situations.

So after thinking about it a little bit, I think the best way would be to just let it "slip" what the names are of the people who accepted the bonus.  Give all of them a chance to pay it back (and some already have) and those that do not, simply reveal their name.  Given the outrage that exists in America, I think the public could put a lot of pressure on these individuals to do the right thing.  The stigma that would follow these people would be enormous.  Any company that hired them would get tremendous negative press.  Basically you shame these people into doing what they ought to do.  It gets done what you want, and it does not do something that in my mind is just dangerous to do, fix problems through the tax code.


  1. I can understand that a deal is deal. Let's say part of the deal of getting these "talents" to AIG were these bonus contracts (kind of like a delayed signing bonus if you will). That's fine. However I am concerned that there are no negotiations for alternatives. Not seeing any budge, I like other Americans wonder if these AIG big wigs even care about the company's well-being.

  2. Right or wrong, the public has marked those AIG guys with a big scarlet "S" for scoundrel. If I were them, I would work something out for their own sakes. Give some of the money back at least for the meantime. Perhaps a payment plan over the next 5 years. If AIG goes down, these marked guys will need another job. Not many companies are going to be willing to hire these guys and take on the negative publicity.

  3. Now that their names are out, they should play ball if they don't want to be branded "Public Enemy #1."