As you may know, some companies that accepted money from the bailout package now intend to give out billions of dollars in bonuses to their top employees. The normal grounds for bonuses seem to fall under the obvious implication that a reward is being given for good performance (and, to me, good performance suggests a successful, in the black, company). As the companies flounder, however, some see that as being a bit of a non-starter.
(Although I wonder, couldn’t we say that certain individuals still deserve bonuses who did their particular job well? Especially if that job has no large or direct effect on the institution/market?)
My real question is about another justification used in defense of bonuses and high Wall Street salary in general. Many say that the salary and bonus packages ensure that these companies retain only the highest caliber executives and other officials.
Given the competitiveness for high ranking positions in the financial field, does it not follow that there are probably a ton of highly talented professionals who would do the same job without obscene bonuses and without an absurd salary? Note that I am not against high salaries and bonuses for these jobs. I just wonder if they are truly necessary and – if so – to what degree.
Given that these people have collectively run the world economy into the ground they are by definition incompetent and do not need to be retained let alone rewarded.
All of the highest paid echelon would work for 10% of their current compensation, sure. What they won’t do is work for 10% of it if a different firm offers them 15%.
What is out of control is company Boards who set compensation. I am underwhelmed by their ability to recruit and retain executives who will put the long-term interest of the company above their personal compensation structure, and I am unimpressed by their ability to create compensation structures that are actually tied to long-term company interests.
As an aside, be aware that the problem many companies face now is paying out compensation already earned by contract. The contract may have been inappropriate–doesn’t matter. We taxpayers are going to end up bailing out companies for some perceived greater good, and part of the liabilities of those companies is to pay up compensation for which the companies are already contractually committed. It’s not as if we can bail out the company but only under the condition that they not pay the boobs who ruined them. They won’t have a choice not to pay.
Gonna be a lot of hollering over this, but it won’t change the basic problem.
