4 ms·

I was under the impression that "bonuses" are discretionary, and not contractual. Every company I've worked with has a baseline bonus based on how the company

by sanj 18y ago

I was under the impression that "bonuses" are discretionary, and not contractual. Every company I've worked with has a baseline bonus based on how the company did and (sometimes) a spiff on top of that due to individual contributions and/or your team's contributions. All discretionary.

jacoblyles 18y ago
It really depends on the employment contract.
CWuestefeld 18y ago
There seems to be little debate over the facts, including that these were, in fact contractual. The debate is only over whether AIG is somehow not bound by those contracts, and if not, whether they should break them. See, for example, http://roomfordebate.blogs.nytimes.com/2009/03/17/when-bonus-contracts-can-be-broken/#more-1459 http://roomfordebate.blogs.nytimes.com/2009/03/17/when-bonus... FWIW, I have a small contractual bonus in my own compensation (not from AIG)
- jhancock 18y ago
  ...and if you commit fraud or take risks that hurt your company, do they still have to pay your bonus?
  - CWuestefeld 18y ago
    I would imagine that any employment contract worth its salt would subject to immediate termination any committing fraud. But you and I have no idea about these particular contracts, do we? But that's really academic, because the AIG employees did not commit fraud. And we're talking about investment bankers. Their job is to take calculated risks. These are very finely calculated. In the case of AIG, the problem isn't that their gambles went south. The problem is that somebody changed the rules on them, so the paper value of the investments (said values not having been realized yet) was changed, changing the calculations going into AIG's credit rating and thus making lenders wary. As was noted elsewhere in this thread (http://news.ycombinator.com/item?id=522777 http://news.ycombinator.com/item?id=522777 ), these executives weren't committing fraud, nor were they even losing actual money.
    - jhancock 18y ago
      you are correct that I know nothing of what's in their contracts. and you know nothing of if they committed fraud...or do you? The real problem is AIG is an INSURANCE COMPANY, not an INVESTMENT BANK. At least the part that the gov is bailing out is about its insurances. An insurance company is only supposed to invest its moneys in very low risk investments. The reason is they are supposed to constantly monitor the costs of covering their underwriting and keep enough funds on hand to cover their bets. They have not done so. This is the root of the problem. Is it fraud for an insurance company to not have enough to cover its underwritings and to continue to take on more? I think so...and that's the core of this problem.
gojomo 18y ago
That a 'bonus' is discretionary or conditional is the common usage -- but the condition set in these contracts, staying through certain dates (even if the recipients are not there now) was apparently met. It also seems the case that in certain fields, 'bonus' is essentially a part of contractually or traditionally guaranteed compensation. They've stretched the term -- but that's become the new meaning, in that field, for years if not decades. So a lot of this hullabaloo is caused by terminological confusion.
colins_pride 18y ago
This is why all of the recent fury against bonuses is so mis-guided. People literally don't understand what they're angry about. The irony is that bonuses are how people everywhere should get paid. Can you imagine how much better our schools would be if there was a mechanism to pay good teachers more than bad teachers?
- silentOpen 18y ago
  The irony is that these "bonuses" aren't meritocratic like your good teacher/bad teacher scenario. These are retention bonuses contractually agreed to by AIG and their employees. Last year, back when AIG knew things were hitting the fan, they decided to offer a carrot to employees who would stay through the storm. Turns out, AIG is "too big to fail" so those that decided to stay with AIG through our current adventure appear to be getting rewarded for incompetence.

by sanj 18y ago

jacoblyles 18y ago

It really depends on the employment contract.

CWuestefeld 18y ago

There seems to be little debate over the facts, including that these were, in fact contractual. The debate is only over whether AIG is somehow not bound by those contracts, and if not, whether they should break them. See, for example, http://roomfordebate.blogs.nytimes.com/2009/03/17/when-bonus-contracts-can-be-broken/#more-1459 http://roomfordebate.blogs.nytimes.com/2009/03/17/when-bonus... FWIW, I have a small contractual bonus in my own compensation (not from AIG)

jhancock 18y ago
...and if you commit fraud or take risks that hurt your company, do they still have to pay your bonus?
- CWuestefeld 18y ago
  I would imagine that any employment contract worth its salt would subject to immediate termination any committing fraud. But you and I have no idea about these particular contracts, do we? But that's really academic, because the AIG employees did not commit fraud. And we're talking about investment bankers. Their job is to take calculated risks. These are very finely calculated. In the case of AIG, the problem isn't that their gambles went south. The problem is that somebody changed the rules on them, so the paper value of the investments (said values not having been realized yet) was changed, changing the calculations going into AIG's credit rating and thus making lenders wary. As was noted elsewhere in this thread (http://news.ycombinator.com/item?id=522777 http://news.ycombinator.com/item?id=522777 ), these executives weren't committing fraud, nor were they even losing actual money.
  - jhancock 18y ago
    you are correct that I know nothing of what's in their contracts. and you know nothing of if they committed fraud...or do you? The real problem is AIG is an INSURANCE COMPANY, not an INVESTMENT BANK. At least the part that the gov is bailing out is about its insurances. An insurance company is only supposed to invest its moneys in very low risk investments. The reason is they are supposed to constantly monitor the costs of covering their underwriting and keep enough funds on hand to cover their bets. They have not done so. This is the root of the problem. Is it fraud for an insurance company to not have enough to cover its underwritings and to continue to take on more? I think so...and that's the core of this problem.

gojomo 18y ago

That a 'bonus' is discretionary or conditional is the common usage -- but the condition set in these contracts, staying through certain dates (even if the recipients are not there now) was apparently met. It also seems the case that in certain fields, 'bonus' is essentially a part of contractually or traditionally guaranteed compensation. They've stretched the term -- but that's become the new meaning, in that field, for years if not decades. So a lot of this hullabaloo is caused by terminological confusion.

colins_pride 18y ago

This is why all of the recent fury against bonuses is so mis-guided. People literally don't understand what they're angry about. The irony is that bonuses are how people everywhere should get paid. Can you imagine how much better our schools would be if there was a mechanism to pay good teachers more than bad teachers?

silentOpen 18y ago
The irony is that these "bonuses" aren't meritocratic like your good teacher/bad teacher scenario. These are retention bonuses contractually agreed to by AIG and their employees. Last year, back when AIG knew things were hitting the fan, they decided to offer a carrot to employees who would stay through the storm. Turns out, AIG is "too big to fail" so those that decided to stay with AIG through our current adventure appear to be getting rewarded for incompetence.