Tuesday, March 17, 2009

The case FOR bonuses is wrong.

This morning's edition of the New York Times includes an article by Andrew Sorkin whereby he is arguing for the AIG bonuses. The gist of the argument, which we've all heard a hundred times, is that if bonus contracts are not upheld here, then no one will have faith in them.

The problem with this argument is that everyone wants to overlook the fact that AIG failed. You take away the bailout money that was handed to them by the government and AIG is yesterday's news. It's like the government served as a loyal body guard and took a bullet to save the company. Only, AIG wants to pretend that that part of it didn't happen.

Liddy is on record saying "We cannot attract and retain the best and brightest talent to lead and staff' the company 'if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,' he said."

The key word in this previous statement that is absolutely incorrect is arbitrary. There is absolutely nothing arbitrary about the Government's stance on this issue. AIG accepted a bailout because they failed. They made very very poor decisions and were facing death. And now they want to continue, business as usual, and reward everyone as though they had succeeded. I'm curious, if AIG did not receive the bailout money, would the bonuses still have been paid?

This AIG fiasco is just one example regarding the need to allow those who are failing to fail. If you want the successful businesses of America to thrive and set examples of the right way of doing business, then it is imperative that one allow the bad ones to fail. Yes, even if those bad businesses are very big. Because, believe it or not, all those experienced employees along with the viable clients of those failing big businesses will go over to the companies that are doing it right. And those growing businesses will quickly fill in the gap left by the failing ones.

People, we don't function in a vacuum. Bailouts only make it possible for the offenders to continue to make the same mistake over and over again.