Live Breathe and Die

Archive for March, 2009

We’re supposed to be living in the information age, but the reality is that we are living in the misinformation age.

Case in point; the nationwide outcry over the AIG employee bonuses. Most people reading this will agree that the very notion of paying out an average $100,000 bonus to employees of a company that was bailed out with taxpayer money is an atrocity. If that were the whole story, that would be true. That is the version we hear from the Obama administration and the media, but is it reality?

If you don’t get it, don’t pass on misinformation

With only a few exceptions, most members of the Obama administration come out of academia or businesses that pay their employees salaries. They do not understand the financial services business. As a result, you may believe that the AIG bonuses are an atrocity and that this company is the very incarnation of evil. Allow me to set the record straight.

After spending 26 years in financial services, including stints with two employers that are currently AIG subsidiaries, I can speak with some authority about pay structures and the realities of making a financial service company profitable. What the news is reporting and what the Obama White House is telling Americans is not the whole picture.

The reality

The average Vice President in a large financial services company makes very little salary. Does that surprise you? The Vice President’s income is solely dependent on performance. Let me explain.

Let’s assume that you are the Vice President in an operations department in a large brokerage firm. Your division processes new client applications and handles the cashiering function for the firm. At the end of the fiscal year, you sit down with your superiors and hammer out a set of goals for the coming year. If you hit all of your goals, the result will be twofold.

One result will be that you will be paid your annual bonus, which accounts for nearly all of your pay. The second result will be that meeting or exceeding those goals will help the company grow, hire more employees, pay a dividend on the company’s stock, benefiting stockholders and aiding the general economy.

As the Vice President in this example, you will work hard all year, including a lot of overtime, just to hit your expected numbers and achieve your department goals. By meeting those metrics, your employees would have processed all client applications without errors and handled your client’s deposits without error. Everyone wins.

The government shoots itself in the foot

Now, lets assume that you have done everything you promised the company, in order to get paid for the year and you are told that the company was backing out of its promises. Is that fair?  Would it be fair even if you were the lowest paid employee in the firm and relied on a bonus?  After all, the principle is still the same?

This is what is happening at AIG. These are not employees who have been paid a bundle of money already, getting even richer at the taxpayer’s expense.  These are people who help the company to grow and work long hours because nearly all of their income is based on performance bonuses.

The Obama administration, in it zeal to demonize all large corporations, is ignoring the realities of the financial services industry and how they compensate employees.  Many of the people receiving bonuses are not Vice Presidents at all, but regular middle-class employees who depend on bonuses because of agreements they made with the company.

Misreporting information to sensationalize an issue does not benefit the public. As a matter of fact, it does a disservice to all parties involved. The AIG employees who actually deserved their compensation will lose income they earned. The public is outraged about an issue that they don’t fully understand and the White House looks like the hero based on erroneous information.

Big business employs millions

This is an inherent problem in our culture today. We are so quick to demonize large corporations that we forget that they employ millions of Americans, pay benefits for those employees and provide paid time off. We need to understand that these companies provide products and services that we all use and depend on and provide a livelihood to many of our neighbors.

Developing a mindset that corporations like AIG are inherently evil serves no useful purpose. We are kidding ourselves if we buy into this way of thinking. AIG can only pay back the government, pay its thousands of employees and make good on its obligations to its millions of policyholders if it thrives and becomes profitable again. Profitability relies on all employees working towards the goal of making the company successful.

A successful AIG can repay the government and pay back the taxpayers. Bonuses are part of this equation. Believing that this is some sort of planned ripoff of the taxpayer is foolish. We can’t be a great country if too many people are foolish.

There’s nothing better than facts. Facts are indisputable. Facts shed light on propaganda and misinformation and government hoey. John Stossel of 20/20 fame does as good a job of collecting facts as any investigative reporter. His segment from the March 13, 2009 20/20 called Bailouts and Bull should be seen by every American.

Our taxpayer money is being spent at an unprecedented level and most Americans haven’t a clue as to what the truth is about these expenditures.  They normally get one viewpoint and never hear any prevailing counterpoint. Well, here it is: