The Wondering Mind

Well pretty much everyone not in cryogenic stasis has heard of the farce at AIG by now. There are so many things I want to shout about this, I barely know where to begin. So I thought I would rant about one thing that bothered me about this from the start. And it’s the idea that AIG needed to offer retention bonuses to these people.

Really?

We are now in an economy where talented people are getting laid off all over the place. It is far from clear for anyone except the politicians and the bankers, including the ones at Treasury, why we couldn’t get equally “competent” people without any incentive beyond something called a “paycheck”.

If we really, really need to hold onto the existing employees, as Liddy and Geithner have claimed, I still see no reason for a bonus. These are the scumbag idiots who brought down AIG; who the hell is going to hire these toxic bankers? Anyone fool enough to hire these clowns, well, you’re welcome to them. Unless it’s a bank with government TARP money, in which case the government should promptly close that bank down.

The whole idea of incentive pay like retention bonuses and golden parachutes, etc. have never made any sense to me. The whole premise for such schemes were so transparently fraudulent it’s a disgrace that supposedly intelligent and ethical adults buy that rubbish, especially at a time like this.

The people at AIG were either fools who did not know what they were doing, or they were reckless and arrogant in their self-esteem. If the former, no one will hire them. If the latter, Wall Street will probably welcome them with open arms. But in the current climate, it is hard to see what other employer will have an opening for them. They’re busy laying off their own bankers; why would they hire ones so tainted?

Similar slight of hand has been used by bankers, executives, and the like arguing for their bonuses in the past. “If you don’t pay, they’ll go some where else.” But where?

“Oh well, China would hire them.” Or “Dubai or Singapore would love these guys.” Really?

If you’re some Anglo-Saxon in your 40’s, or so, then there is a high transaction costs involved with going to China, Dubai, or Singapore because they will pay that much. (And it’s never clear that such high pay is available abroad.) Your family who may not want to move to some place with no family or friends, for a start.

There’s a price to pay for living in places where the air quality is so bad scientists believe it shortens your life expectancy, or living in a place where you are fined for chewing gum.

And then there’s the cost of the move, there and back. Not only the financial costs involved, but also the disruption to life, the adjustments needed, etc. I’ve lived in several countries and many more cities, so I can say from experience that it is not an easy adjustment, especially moving to a place where they speak another language.

There are some people who love that kind of stuff, but most people don’t. And even among people who do like it, they like it much less as they grow older and have more ties and commitments.

So why do so many companies apparently buy this fairy tale? Because the people who are in charge have a stake in the game themselves. They are the same coterie who populate all the boards of each other’s companies. Or they’re “HR consultants” who are hired by the very people whose pay they advise on.

Which is why it is so sad to see the Obama administration toe the line on this. For an administration which is supposed to break away from the cronyism of the Bush era, they seem far too ready to buy into the established traditions of corruption.

This is the primary danger for the administration. It is not so much that they are squandering goodwill, although they are. It is that the people will lose faith in the idea of change. When you pass up such obvious opportunities for much needed change, people are going to wonder if you have the competence or the will to make truly meaningful change.

There is a desperate need for change in health care and education, to name only two areas. And these changes will require painful compromises and sacrifices. They will also be opposed by powerful vested interests. The only way these changes happen will be with the broad and unstinting support of the people. But you will not have such support if the people doubt your competence or your motives.