Tuesday, March 17, 2009

The AIG bonuses

In additional to the generally despicable act of the AIG executives paying themselves bonuses for their success in running their company into bankruptcy, there is the issue of insult.

The reason repeatedly offered for why executives should get enormous bonuses is that it is necessary to get and to keep the best talent. Aside from being arrogant, this is insulting because ridiculous.

NASA, a government agency, is able to hire and retain people who are literally rocket scientists without paying any of them millions of dollars. Similarly, universities are able to hire and retain the very best economists without paying them millions of dollars. Governments and universities are able to hire and retain able administrators without paying them millions of dollars. States and federal governments are able to hire and maintain able and experienced lawyers as prosecutors and judges at every level without paying them millions of dollars. Even doctors and surgeons, though well-paid indeed, are not paid millions of dollars. And so on for scientists, novelists, artists, experts and professionals of every kind. Most particularly, generals of the army, air force, and marine corps, and admirals of the navy are hired and retained without paying them millions of dollars.

This latter example is particularly cogent. War-fighting is competitive in the extreme. The stakes are higher than in any other business. The Defense Department is the largest institution in the country in terms of the number of people directed, assets managed, and budget. It is also arguably the most technically sophisticated organization in the country. Its responsibilities as an institution are immense.

The generals and admirals who manage it are limited by law to getting paid $177,000 a year, plus whatever perks in houses, cars, officers' messes, golf courses, uniforms, medical care, and so on they can wring out of the system. But it isn't millions.

Yet there is no shortage of generals, no shortage of surgeons, no shortage of judges, no shortage of university presidents, no shortage of rocket scientists, nor of physicists, nor of novelists, nor of artists. Without paying them millions.

Generals who consistently screw up are drummed out of the service. Doctors who kill their patients are eventually barred from practice. Incompetent lawyers are eventually disbarred. Professors who do not publish, perish. Novelists whom no one reads languish and become self-pitying alcoholics.

Only corporate executives are rewarded with millions for bankrupting their employers. They are rewarded even for failure because they control the boards of directors which are supposed to control them. The reason they get millions is that they set their own salaries. They loot their employers with impunity because they control the boards of directors, rather than the other way around.

Control of boards of directors has to be wrested away from corporate executives and returned to a combination of stockholders and government regulators.

It is time to undo the legacy of Ronald Reagan.


  1. Anonymous2:15 PM

    right on Bro

  2. Beautiful, Jack, beautiful. My sentiments exactly!

  3. Excellent...wish I had this article in hand this afternoon when talking to the union about why they need, and took a raise, even though we have not, and are looking at major concessions instead.