Merit-based pay system
Boy, have I been stupid. All this time, I always thought that working people were rewarded for doing things that help their business grow and earn money.
Well, I’ve never had a mind for business or economics, so I have learned a lot this week when I heard about insurance giant and financial counseling company American International Group (known infamously as AIG) and its bonus system.
AIG is foundering after losing a lot of money on insurance claims on foreclosures and other financial ventures that didn’t turn out very well. In fact, life at AIG has been so bad, it has asked for and received $173 billion in U.S. government bailouts over the last six months.
So it stinks to work for AIG, right? Wrong! It seems that a big part of what they need the bailout money for is to pay lavish bonuses to the executives who helped run the company into the ground. What a country!
And it’s not just AIG. It seems that a lot of banks that came hat in hand to ask for government money are also doling out financial rewards for doing a terrible job with their companies.
AIG is telling the government that it is bound by contract to pay $165 million in bonus money and is obligated by law to reward their executives. Imagine what they would make in bonus money if the company broke even!
President Obama and several Congressmen from both sides of the aisle are anxious to use their muscle as an 80-percent owner in AIG (through the bailout) to renegotiate the bonuses and have made numerous suggestions, from a 100-percent tax on the bonuses to having the executives commit hara-kiri.
Frankly, I think this provides hope to any poor schlep who wants to make it big in life. Would you rather live the old American dream of working hard, being gradually promoted through that hard work and eventually running the company, or the new AIG American dream, where you are hired and blindly given million-dollar bonuses sight unseen, regardless of how effective your work is, even if you are so bad, you run the company into the ground?
Maybe not every business is run that way, but at least we can be secure in the knowledge that our best financial minds in our top financial institutions are running their businesses that way. With our taxpayer dollars in these money gurus’ hands, we can be sure that it is money well spent.
David Snow is managing editor of the Demopolis Times.