Monday, March 16, 2009

It is not fair to block corporate bonuses

It is ofcourse not fair to block corporate bonuses for companies like AIG and Citi and other huge loss making companies.

Let us say that a company has made a loss of $100 Billion for the year and the company is handing out 200 Million in bonuses to high ranking executives. There is nothing wrong in that because, had it not been for those executives, the companies would have made $200 Billion dollar losses. If giving those $200 million in bonuses is not fair, then what justifies government giving tax money in the form of loan to the extent of $100 Billion dollars in terms of revival loans or some other fancy names.

If you decide not to support bad companies and bad executives, the let the companies die.

Now having taken these public money, what if these companies, just have fun and not show results. What is the perks for the top execs to perform now? If you set a trend that bonuses cant be given to these companies, what prevents the highly talented execs to stick onto the bad companies... They will leave the company and join some other performing companies and get salary and bonuses and some not so intelligent characters will become CEOs of these Government funded companies.

1 comment:

Balajee said...

Makes sense.. but how can we show that these executives were not the cause of the crisis in the first place with aggressive lending practices and so on? Also, a $100M in bonus is a little too much in my view. Maybe something like 25% of their base or 50% of their based may be something more reasonable. In this troubled time.. having a job is motivation. If they need more motivation than that, that's too bad.