Via The Anchoress, here is a short blurb written by Mike Rowe, host of The Discovery Channel‘s “Dirty Jobs”, in response to a reader’s question about the AIG bonus uproar:
… a better term than “bonus” should be used to refer to these payouts. For many, a “bonus” is not an unexpected surprise. It is the motivating factor, and the only reason the working relationship exists at all. It is in other words, it’ the very essence of the deal.
Because these “bonuses” are not guaranteed, they are a reflection of an individual’s willingness to assume a certain level of risk that most salaried workers would go out of their way to avoid. Likewise, “bonuses” are the only way for highly competitive corporations to attract and compensate “top talent.” Arguing over whether the money in question is gross or exorbitant is beside the point and after the fact, in my opinion. So too, is the exact manner in which it’s earned. That’s between the employer and the employee, and governed by the terms of the deal. What really matters, is the workers conscious willingness to forgo a big guarantee, in favor of a potentially larger payout based on his or her performance. It’s an entirely different form of risk, that is the opposite of a weekly or monthly paycheck.
If, as a contracted employee who signed on for the sole purpose of making money, I did everything I was supposed to do to earn a payout of $5 million dollars, I would expect to be paid. I assumed a level of risk, and preformed as asked. A deal is a deal. The only circumstance that could justify a non-payment, would be the bankruptcy of the firm. (That’s the biggest part of the risk I assumed, working in a volatile and competitive industry.) However, if the company stays in business, or is not allowed to fail, I’d absolutely expect my money. And if I got it, and was then suddenly asked to return it because the government realized it looked politically stupid and fiscally foolish for subsidizing my big fat bonus with taxpayer money, I might be inclined to say “I’m sorry, but I’m a tax-payer too. If you didn’t want to pay me what I was legally owed, you should have let the company fail. My deal was with AIG, not you.”
This “bonus rage” would not be happening in a world that respected consequences, because in that world, those companies who can not afford to pay their bills would simply fail, the way they’re supposed to. Likewise, all citizens would live the lifestyle they can afford, the way they’re supposed to. Of course, that is not the world we live in. In fact, companies like AIG have prospered exactly because so many people now live beyond their means. The hard truth is, those big bonuses were earned because AIG got rich saying “yes” to millions of people who should have been told “no.” And because we’re all connected, we all get hurt. (emphasis added)
It’s nice to see that Mike Rowe gets it. These were retention bonuses, paid out because AIG wanted to retain the services of as many good money managers as possible in the wake of its collapse. Many of them agreed to stay behind and work for an annual salary of $1, with the understanding that if they were able to salvage assets and keep the company from going under completely, they would be rewarded with a retention bonus as a “thank you.” All of this was negotiated with employees independently of the bailout that AIG received from the Federal government.
None of this is immoral, nor is it illegal. If you think that banking executives earn too much money, then you need to understand something that I learned some years ago — the amount of money you earn is directly proportional to the amount of earnings that you provide for your employer. In other words, if you want more zeros on your paycheck, then work toward being rewarded with the responsibility to handle million or billion-dollar deals. Investment bankers do this on a routine basis. I do not envy the earnings of financial professionals simply because I have never risked my career by signing a piece of paper where all the numbers were followed by eight or nine zeros. But if I am ever given the responsibility to manage that kind of money, then I would expect to be compensated accordingly.
Finally, for all of you out there who are cheering the march toward nationalization and socialism because somehow Big Government is supposed to be more caring and just toward individuals than Big Business — how on earth can you watch what has happened to the employees of AIG who have been pilloried, mocked, harassed, threatened, criminalized, and perhaps eventually punished for no wrongdoing whatsoever by our government or its subsidized cronies (e.g. ACORN), and come to the conclusion that we can trust government to treat us all fairly? I would much rather put my trust in a private corporation that can’t legally confiscate my wealth or send an armed militia to threaten me by force, than in a Federal government with the authority to use those powers against its citizens.