Rational thinking about corporate bonuses

Let us pause for a moment from all the hysteria, get a glass of water, have a seat and take a deep breath to reflect upon the AIG bonuses. Here is some rational thinking from William Byrne, a retired corporate executive and a very smart fellow who happens to be my brother (don't hold that against him):

Regarding bonuses. In most companies bonuses are paid on the basis of performance: corporate, division, individual. The parameters for an individual’s bonus depend on the employee’s job description, and are generally weighted according to the priorities assigned to the elements of the job description. Examples might be: generate new business, submit winning proposals, complete a project within budget, etc. And in my company, if the business unit did not make a profit, no one in that unit got a bonus – so there could be overriding corporate goals as well as individual goals.

So to make a blanket demand that all AIG bonuses are bogus might make the public feel better, but might in fact be detrimental to future performance. But this will never sell in the public place so long as large amounts of public money are going to AIG. So a compromise is needed that permits legitimate bonuses be awarded (but maybe not paid right away, or paid in relationship to a formula based on the return of the bailout money to the government), but prohibits bonuses for the unperforming (whatever that means) units of the company. A very sticky problem. Ed Liddy (current AIG CEO) is a pretty sharp guy with a very good management track record. He needs to show his leadership skills in this situation.

Hedge Funds May Get AIG Cash

Here is another example of the folly of rushing ahead with simple-minded legislation that no one understood to solve a complex problem for which no one has a solution. I'll say it again, as I did before the TARP legislation passed: This will be the biggest flim-flam in American history.

Fed Data Show Banks Are Lending

So, what are we to make of this new report?

One of the underlying premises of the various bailouts and stimuli is the claim that banks aren't lending. This is report is dangerous to the Obama administration's plans, and thus, I suspect won't get much attention.

G.W. Bush: Obama 'deserves my silence'

In this former President George W. Bush is showing a lot more grace and style than the new president's administration. At every turn, Obama and his folks continue the thread-bare blame-Bush strategy.

Here's David Axelrod defending Obama's Treasury Sec. Tim Geithner against charges that he screwed up by allowing AIG pay bonuses:

David Axelrod, senior adviser to the president, dismissed such talk, citing the financial mess that Mr. Geithner had inherited. “He has been confronted with a situation and challenges that are unparalleled in modern history, and to put it all on his shoulders is not fair and not right,” Mr. Axelrod said. “He’s a brilliant and committed guy with a great deal of experience in this area, and we’re standing with him.”

Sooner or later, the Obama administration will have to start taking responsibility for what it's doing to this country.