Screwing up for fun and profit; employees rewarded for awful yearTo achieve true prosperity and financial security for life, what you really need is the ability to screw up big time.
By: Dale McFeatters, The Dickinson Press
To achieve true prosperity and financial security for life, what you really need is the ability to screw up big time.
I base this observation on the revelations coming out of Wall Street, and I am waiting for the call from one of the great investment houses because, given the opportunity, there’s not much I can’t botch. Certainly I couldn’t do worse than the people currently running the show.
The firm getting all the attention at the moment is the giant insurer AIG, which, thanks to some dodgy deal-making, is now a ward of the U.S. government at a cost to the taxpayer approaching $200 billion.
To reward them for a truly terrible year, AIG is planning to pay bonuses to 418 employees. To us laypeople, a bonus is a reward for a job well done and most of us would think that nearly bankrupting the company would fall a tad short of that mark. Silly us.
AIG is paying bonuses of more than $1 million each to 73 people in its financial-products division whose bad judgment and lack of foresight led to the firm’s near-collapse. Apparently, some of them threatened to sue if they didn’t get their bonuses. In a sneaky sort of way, you have to admire that kind of nerve.
We were assured that the bonuses were a way of attracting and retaining talented people. I would suggest that the trick to attracting good people in this job market is to hang a “Now Hiring” sign in the window and then call the police to handle the crowds of applicants.
The bonuses have been described as retention money to keep employees from leaving for all those other jobs going begging on Wall Street. The bonuses included $33.6 million for 52 people who left the company anyway. This is almost too funny.
So who does Congress beat up on for this ill-conceived system of rewards? Edward Liddy, the government-installed CEO of AIG, who is pulling down a salary of $1 a year. Given the perverse incentives of Wall Street, if he succeeds in saving the company we probably would be justified in demanding the dollar back.
AIG is of great interest because we, the taxpayers, own it, or 80 percent of it, anyway. But generosity in the executive suites goes on despite the bad times.
As The Wall Street Journal headlined, “Poor Year Doesn’t Stop CEO Bonuses.” Of course not.
The Journal cited six CEOs who received average annual bonuses of $2.35 million despite the stock of their companies falling on average a little more than half. Leading the pack was Duncan Niederauer, the CEO of NYSE Euronext. He got a bonus of $4 million even though the stock declined 69 percent and suffered a net loss of $738 million. Don’t you kids at home try that; it’s only for skilled professionals.
Remember Nick Leeson? He was a Singapore-based trader for Barings Bank, London’s oldest and one of its most respected merchant banks. In 1995, he lost $1.4 billion in unauthorized trading, causing the bank to be sold off and disappear. Leeson was convicted of fraud and served time in prison. That is just so last century.
Of course, you remember Jerome Kerviel of France’s Societe Generale. In January 2008, it was discovered that he had lost $7.2 billion in unauthorized trading.
The French, in their desultory way, filed charges against him. But when last heard from, he was working as an IT consultant. The curious thing is, when Societe Generale executives came for him, he was expecting a bonus of $780,000.
If he had been working on Wall Street, he probably would have gotten it.