Andrew Ross Sorkin has an article in the March 17, 2009 New York Times, The Case for Paying AIG Bonuses. Here’s an excerpt from the piece:
Pearl Meyer, a compensation consultant at Steven Hall & Partners, says it would put American business on a worse slippery slope than it already is. Business agreements of other companies that have taken taxpayer money might fall into question. Even companies that have not turned to Washington might seize the opportunity to break inconvenient contracts.
If government officials were to break the contracts, they would be “breaking a bond,” Ms. Meyer says. “They are raising a whole new question about the trust and commitment organizations have to their employees.” (The auto industry unions are facing a similar issue — but the big difference is that there is a negotiation; no one is unilaterally tearing up contracts.)
When it’s a union contract, it “must” be broken. That is just the way of the world today. We must keep our competitive edge, or so the story goes.
When white-collar executives and/or management at some of the largest and wealthiest companies mismanage, lose the company money, oversee stock devaluation, or steer the entire economy off a cliff, we must just give in to their demands. Just hand over the money, bail them out, no questions asked, no stipulations. And we wouldn't think of breaking those sacred contracts with them. (Give me a break!)
From a recent Economic Policy Institute report, Squandering the Blue-collar Advantage:
Of the 20 richest countries tracked by the U.S. Bureau of Labor Statistics, the United States ranks 17th in hourly pay for production workers in manufacturing.
Of the 16 nations with higher compensation for production workers in manufacturing, the United States ranks behind only Ireland (a nation with a manufacturing workforce less than 2% as large as that of the United States) in terms of “value-added per employee” (a rough measure of productivity).
The combination of relatively low compensation and high productivity means that U.S. manufacturing leads the world in terms of competitiveness of per unit costs of manufacturing output.
If the wages claimed by managerial and non-supervisory labor in the United States were the same as the median of comparable countries, U.S. manufacturing would have a 6.4% cost advantage over major trading partners.
But somehow we weren’t competitive because the auto workers made too much money. The workers' gargantuan paychecks somehow led to the auto industry’s downfall. People were buying Japanese cars because Japanese workers are, supposedly, being paid less? Yet, it actually appears, competitively-speaking, U.S. manufactures are some of the most productive and competitive in the world.
According to a report by the Center for American Progress, Supersize This, CEO pay in other industrialized countries is about one-third of what American CEOs make. U.S. CEOs make two-thirds more than similar CEOs in other countries. Yet, U.S. executives have destroyed the world economy. And, therefore, they should be able to get bonuses? And keep their jobs? And we are unable to break the fragile bond we have with these malevolent overlords? Our present debacle seems to affirm the notion that the supposed experts, the executives, are at fault. What were they being paid all that money for anyways?
As we can see, it’s not that the wage-laborers are commanding too much in pay and this is causing the U.S. to be less competitive. It’s short-term, risky decision-making by greedy CEOs leading to the decline. It’s the focus on casino capitalism and making money by short selling instead of concentrating on the real economy. Any bond or contract we have with these financial hucksters should be torn up.
Let’s remove corporate charters, let’s institute a 100 percent surcharge on bonuses, let’s make the capital gains tax equivalent to the marginal tax rate, or just get rid of the capital gains tax and charge it as income, let’s also raise the marginal tax rate, and let’s prosecute.
These traders, executives, and financiers were criminals writing checks they knew were no good, in a manner of speaking. These people should be out of their jobs, their wealth/wages should be seized or garnished, and they should be brought to court.
From Sorkin’s article, Edward M. Liddy, A.I.G.s chief executive, claims “We cannot attract and retain the best and brightest talent to lead and staff if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury.”
These stellar staffers are the same ones that blew up the economy. Maybe you need to look for more diligent workers concerned with doing good work rather than just making a quick ill-gotten dollar.
All of this is causing the free market myth to collapse right before the very eyes of the same snake-oil salesmen who’ve been selling/pushing it on us the last 30 years and they don’t know what to do. The curtain has been pulled back…the emperor has no clothes.