Tuesday, March 17, 2009

Contrarianism re AIG

I have been listening to the sewage that is being spewed about the AIG "bonuses" with increasing exasperation. Why, for instance, are we assuming that these "bonuses" are "performance bonuses?" In many instances, applying the word "bonus" to this type of compensation is misleading. Frequently, these payments represent nothing more than deferred compensation. Companies and employees (or prospective employees) agree to lump sum payments to be paid after a certain time, rather than partially paid over a period of time (i.e. bi-monthly salary checks). Furthermore, it should not be surprising that these "bonus" agreements exist in AIG's case. These types of agreements are frequently used by companies that are in difficulty, to induce talented people to work for them.
It appears obvious to me that the sturm und drang that has ensued from the AIG "bonuses" is more a result of political calulations aimed at distracting attention from the true culprits (i.e., Congress), than from valid concerns.
The point of it all is that the government has no business in business. Providing public money for private companies is an invitation to the invocation of the Law of Unintended Consequences.


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