connecticut politicsIn the Sunday March 15 version of <a href="http://www.nytimes.com/2009/03/16/business/16aig.html?_r=1&hp> the New York Times </a> AIG after being bailed out by the taxpayers has paid $165 million in bonuses to its management staff. This is outrageous. It has earned the ire of the Obama Administration's Economic adviser Lawrence Summers. Much to our surprise is the comment may by Senator Mitch McConnel stating "If you're going to take the government as a partner, the message here, I'm afraid, to any business out there that's thinking about taking government money, is "Let's enter into a bunch of contracts real quick, and we'll have the taxpayers pay bonuses to our employees,' Interesting comment by the head of the party that got us into this business. One does note that he does not advocate abrogating those contracts with the AIG executives. He states the obvious but does not intend to help the Administration do anything about it.
The Administration's arument Summers claimed that "There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system."
Well what good is having the power of government if it cannot break a contract or two. The government always has the upper hand when making contracts. If any institution should have the right to break a contractual obligation, it is the federal government that should have that power.
What we have here folks is a dilemma. On the one hand, we have the legal obligation to pay bonuses to some of the very people who helped put AIG into the financial problem it is in. Hence, we are now in the legal position to reward their behavior. Sort of leaves a bad taste in you mouth doesn't it?
On the other hand, we have the moral consideration. I do think that the Administration is making every effort to stop these pay outs. They should bring in each person and state the moral imperative. If any executive has a conscience they should give up those bonuses. And if they don't the government should refuse to pay, let them sue the federal government. These are bonuses. A bonus is suppose to be paid when a person goes beyond their normal job and performs exemplary. Driving a company into bankruptcy does not deserve a bonus. How in any contract can a bonus be paid in good faith for bankrupting a company? This defies logic and reason. Is is also symptomatic of the growing gulf in corporations between the highest paid executives and the lower paid staff employees. Those executives have no idea what their workers go through and, frankly, do not care. If they did they would not deliberately drive their company into bankruptcy. And this could have been avoided.
Now, since the US government, and by extension the American people, own approximately 80% of AIG, perhaps it is time for nationalization of the company. I know. I hear the comments now how could you possibly advocate that. Well, it appears that the Federal government could run the company better than the former owners. This could be a great experiment. What if the Federal government could run it better??? Hmmm. It would mean that the American people would have a greater say in the operations of the company. Is this bad???? It certainly could not be any worse than corporate CEO's bleeding the company dry without any concern for the stability of the company. Who says business leaders did not learn from the 1980s. The learned the basic rule, "I'm in it for myself, forget the company."
As for the legal reasons for the Federal government to uphold contracts that may be legal but are morally inexplicable, I say break the contract. Then let those CEO's sue to get their "bonuses". Take a page out of the play book of companies who refuse to pay for workman's compensation etc. Companies know they are liable and fight the suite anyway. Hoping they will pay less by wearing down individuals to the point they will give in. Let's turn that around. make the CEO's justify on record why they should get their "bonuses." I know there are many who do not deserve workman's compensation. I am arguing for those who have legitimately gotten hurt and rightly deserve compensation.
What is a government for if it cannot at times of extreme injustice use the sovereign power it has to break a contract. I hope the government goes through every line of each contract and finds a way to not pay for this outrageous unjustifiable payment. I do not advocate the breaking of contracts lightly. However, this is a moral imperative. They might be able to prevent payment of the "bonuses" by looking at the definition of a "bonus." It comes from the Latin derivative of "bounty". It means "something in addition to what is expected or strictly due." I would say that the $165 million in "bonuses" was not "strictly due" and should be challenged in court.
