Contractual obligations made me do it!

US President Obama instructed the Treasury to look into the massive bonuses being paid to AIG staffers. AIG, which is seeking more huge government bailout funds and helped fuel the current economic meltdown, planned on handing out $165 million in bonuses to the same staffers who helped create the collapse. They say they are “contractually obligated” to pay the bonuses. Who wrote these contracts? Wasn’t there a performance clause written into them that tied bonuses to performance?

What about the word bonus does AIG (and the rest of the corporate world) not understand? Let me help them out with a quick definition:

bonus  • noun 1 a sum of money added seasonally to a person’s wages for good performance. 2 Brit. an extra dividend or issue paid to shareholders. 3 an unexpected and welcome event.

— ORIGIN Latin, ‘good’.

compact oxford English dictionary

Please note the bolded sections – good performance and welcome event. Nowhere in the definition are the words entitlement, crashing the world economy, contractual obligations or gutting corporations used. And I can guarantee the performances were neither good nor welcome.

I find it astounding that no terms were put down concerning bonuses. The line given over and over that bonuses must be given because of “contractual obligations” doesn’t make sense. Bonuses are rewards, not payoffs for terrible performance from arrogant and rash people. As well as rewriting basic business common sense (see definitions of golden parachutes, ninja loans and sub-prime loans), the business community has rewritten the definition of rewards and bonuses. Golden parachutes and massive unearned bonuses have become the standard. No punishment for bad performance or criminal behaviour; just rewards galore. A global blind eye was turned as the business world plunged headlong into this modern-day gold rush.

The world is being held hostage by the rule of psychopathic economics. The platinum privileged have run rampant through the corporate world, rewarding themselves and their cronies for blatantly bad business decisions and demanding governments bail them out now that their worlds have come crashing down. The corporate gurus still believe they should have free reign over the business world, despite the fact they have just proven, on the world stage, they are inept, corrupt and incompetent.  AIG is not alone in this. Many companies have behaved badly.

Their rational for handing out bonuses is that it helps them “retain” the best minds. Makes you think doesn’t it? Their best minds have contributed to the looting of the world’s economy, gutting of the banking industry, and arrogantly ignoring the lessons of the Depression. Business does not always know best – that’s why governments have been forced to institute regulations. Simply because you have a corporate title does not make every decision you make the best one or even a good one. History is littered with the corpses of uncontrolled corporate greed.  Anyone remember 1986? Ivan Boesky’s now infamous commencement address,  “Greed is all right, by the way. I want you to know that. I think greed is healthy. You can be greedy and still feel good about yourself”. Deja vu all over again.  The past 3 decades has seen excessive greed and psychopathic behaviour rewarded, praised and allowed to accelerate to a degree that made it virtually impossible to halt the occurrance of this new Depression. We can no longer cloth the disaster in lesser words like recession, downturn, correction, as we have in the past decades, in a vain attempt at shielding ourselves from the realities of unrestricted corporate narcissism. Greed is not good.

An interesting sidebar on this issue is the Canadian Banking industry. Canadian banks were under tremendous pressure to hop on the sub-prime band wagon – Profit at all costs, responsibility nil. Critics here in Canada lambasted the banking/mortgage industry as stodgy and out of touch with modern practices. These were code words for “we are missing out on the rush for unregulated profits”.

Guess what? The same people that criticised Canadian reticence for silly risks are now praising our “stodgy” banks as being the soundest in the world. Don’t misinterpret this as my praising Canadian bankers – if given the opportunity, the majority would have leapt headlong into the sub-prime nightmare in a heartbeat. Canada has indulged in it’s fair share of the Golden Parachute culture. Greed does not recognise borders. We simply got lucky that our government moves in slow and mysterious ways. That plus previous Finance Ministers have refused to be swayed by silver tongued snake oil salesmen. Canadian banks simply look good now that the sub-prime Emperor’s New Clothing has been seen for what it really is – the hollow, morally bankrupt philosophy of greed is good.

I find it wildly amusing that as of March 17/09, 4 of our banks are now in the top 10 in North America. This was achieved through old fashioned business principles – watch the bottom line. Well that and the spectacular collapse of our neighbours to the south. With each collapse and bailout, our boring and regulated banking industry just looks better and better. Bloomberg said it best:

Canadian banks have remained profitable, outperforming their peers, because of tighter government restrictions on lending and capital requirements.

In short, no liar loans, no option ARMS, no piggyback loans, no teaser or stretch loans for Canadians. No Income, No Job, No Assetts, No Loan. Makes good business sense doesn’t it? You don’t have to be an economist to see the wisdom in that.

While we are at it let’s add No Bonuses for bad behaviour. Now is the time to chip away at the culture of corporate entitlement. The world economy will not collapse because unearned bonuses are withheld. That train wreck already happened so there is nothing more to lose by voiding these “contractual obligations”.

Tags: AIG, AIG bonuses, bank bonus, business bonus, canadian banks, contract bonuses, contractually obligated, corporate bonuses, corporate psychopath, depression, economic collapse, gov bailout, greed is good, snake oil