esrosedotblog

ALL THE RAGE

I don't share all the rage at the AIG bonuses.

Of course they represent the worst of corporate America, especially the financial sector.

On the other hand, they are perfectly normal.

In good times people have bonuses. They look forward to getting them.

In a partnership, the bonus system is used as the main avenue of compensation. It is meant to reflect the skills of the partner as a rain maker as well as a practitioner of the particular art.

We had bonuses in my company. Mine were extraordinarily large by any measure. Most professional companies are partnership forms. Consulting companies, accountants, attorneys, brokerage and insurance companies. That's how AIG started its system.

Very common but as most people are used to the triangular corporate structure, they really don't get partnerships.

In a partnership one's "salary" is relatively low. The real meat is in the bonus.

In good times the bonus system is a real performance driver. If fairly constructed it eliminates a lot of the "middle man" bureaucracy that corporate compensation requires. You get what you truly earn. Not what some shit in the personnel office thinks you should earn.

In bad times, the bonus system gets screwed up by human nature. Survival needs come in and the bonus is locked in. Signed for in advance. Of course this is upside down to its purpose but, believe me, AIG is not the only company where this has happened, whether financial or not, if it is closely held.

Sure, AIG is pretty big to be closely held and it is, in fact, not closely held. But the bonus structure was allowed to endure.

When the partners owned the company, setting overly large bonuses or locking them in would only be screwing yourself.

Publicly held, not so much.

That is the technical side of it.

The other side of it is that the whole thing is a tempest in a teapot. People are pissed. They should be. But the money that is going out to bonuses is a small part of the money that is being sloshed around. There are larger pots of soup that are being pissed in.

I have some faith in the fact that the Obamas and Congress are getting their arms around this whole thing.

Maybe this is a good exercise in anger therapy. Pounding pillows. Screaming. Beating each other with "batacas".

Obama said he took the responsibility for it. "The buck stops here".

That means "move on folks, there ain't nothing going on here". We have more important things to do and he will do them.

Oh. Geithner? I think he is so overly spread thin. They gotta do something about that.

They will.

Labels: Administration Obama