United Liberty
3 Reasons You Shouldn’t Be Upset About Big Bonuses
Thu, 02/04/2010 - 4:09pm | posted by David Carlson
In the State of the Union Address President Obama again attacked banks and proposed a special tax on those businesses because of the big bonuses they are giving out:
To recover the rest, I have proposed a fee on the biggest banks. I know Wall Street isn’t keen on this idea, but if these firms can afford to hand out big bonuses again, they can afford a modest fee to pay back the taxpayers who rescued them in their time of need.
Attacking banks for giving out big bonuses is simply ridiculous, and here’s five reasons why:
1) Unless you have ownership in the company, it shouldn’t matter to you
Let’s say that a company like Home Depot decides to pay out big bonuses to their managers. The only people who should be upset are the stock owners. These owners could have received some of this money as dividends but instead it was used to pay big bonuses to the managers. This should be the same concept related to the banks: their bonuses really have nothing to do with you, unless of course you are owner of the company stock.
2) But the taxpayers own part of the banks!
Yes it is true that we “bailed out” the banks. Here’s the problem: Americans should be upset at the government for being irresponsible with their money. If the manager of your investments put a high percentage of your cash into a company that was likely going to fail sometime soon, wouldn’t you be upset? That’s what our government did: bailed out failing companies. If anything your anger should be directed at our government for even MAKING us owners of these failing institutions.
3) Without these bonuses, talent will jump ship
Individuals who go into banking are expecting to work grueling hours and pay their dues with the expectation of a high payout. They don’t go into it because it is “easy” or even desirable: they go into it for the cash. If you worked for a company like AIG who were so publicly attacked for their bonuses and even threatened with a 90% tax on those bonuses, wouldn’t you jump ship pretty quick? We knew before we (unfortunately and wrongly) bailed out these companies that they attract top talent by paying high bonuses. If we attack this payout structure enough talent is going to jump ship and go to other companies, leaving the companies value to decrease relative to competition. We want that taxpayer money back, right? Not going to happen if we scare people away from working at those firms.
The position we are in is very unfortunate. If we operated as a free market, companies would have to pay for the risks they take, even if that meant bankruptcy. Unfortunately we now reward risk by bailing out companies that took big gambles and lost. Getting upset about big bonuses seems to be the least of our problems.
If I struggled long and hard to create and build my own business, and it was profitable, I would object to Obama telling me I cannot have a bonus, and if I wanted to bonus those who helped build my business, I should be able to do that. Similarily, if a board of directors, acting also in my behalf, wanted to pay a winner a bonus, that too should be OK. I would object to a CEO ripping off gobs of cash on his own say, if the company was chartered with a board and if trading publicly. The result of bonuses too high in any case can mean the collapse of the company, for which Obama should still have no say. Now, if he has already declared we have a Rousseau-Marxist kind of government, he has a legal right to throw us all in prison if we do anything he dislikes. Just ask Castro or Chavez, those who model for Obama. See The Changing Face of Democrats on Amazon and claysamerica.com.
4 Reason why you should be upset about big bonuses (specific trade and establishment):
1) I couldn’t give a monkeys what people pay their workers, executives (unless it’s too little) and so on and so forth. However, I do believe in excellence and bonuses being connected to performance and they performed terribly by flooding the world with the one thing that could destroy it, finance. That’s why Iceland went down and why Britain and America are struggling - because they had more finance on their books than physical assets in the country.
2) What are we talking about here? This isn’t just some corporation selling electrical equipment or the likes, these are managers of our money given a position of trust in our society way above most and for that reason alone they should be on the ball about everything, not just profit making. I don’t think they should lose their bonuses because I don’t think these particular individuals should be there right now.
3) It’s all well and good reading reports and reasons for why it happened, but I come from a different source! When I see a man borrowing £80,000 without any collateral to change his vehicle for out of his range sports cars and another being given a £ 160,000 mortgage on a £15,000 per year wage, I realise sense has gone clean out of the window and someone has to pay for that, but they punished the innocent taxpayer so the rules of ethics went straight out the window in this circumstance anyway.
4) You misunderestimate (sorry, can’t get away from that word, it still cracks me up whenever I write it) your own kind! You just watch what will happen if those high and mighty execs leave one of the most (if not the) resourceful countries on the planet. they’ll be replaced with better if Ron Paul got into power, but they would be replaced with the same right now and I think we need fresh faces to boost our morale, but the government or top bankers don’t think like that!
I don’t agree with this new taxation or that we should interfere with company policies as they stand, but then I never ever agreed with bailing them out in the first place so what rules do you revert to when they have been broken in a disgraceful manner. I’ve seen people lose their businesses with the government showing no mercy whatsoever so that’s the way it should be for everyone!
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