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The companies being bailed out are very large. Your example does not work because it presumes that bonuses are, or should be, tied to profitability or performan

The companies being bailed out are very large. Your example does not work because it presumes that bonuses are, or should be, tied to profitability or performance of the entire company. Many companies wisely do not do this; rather they tie bonuses to the performance of business processes they are responsible for. Suppose you work at a plumbing and carpentry business. You work for the plumbing division; an incompetent coworker works in the carpentry division. The coworker buys loads of wood for a client, but then lets it sit in the rain for too long and it rots. You have an employment contract that rewards you with a bonus for the performance in the plumbing business, which performs well. However, the loss of material causes the firm's overall profitability to turn to a loss, even though your division has reversed some of the damage of the carpentry division. Should your bonus be reneged because of the carpenter? Suppose you have a job offer at a competing plumbing business, and you decide that you will leave for that job if your current employer eliminates your bonus despite the contribution in profits you have made to the firm. Is the firm best served by eliminating your bonus? Questions of bonuses for the CEO, presuming it was the CEO who presided over the disaster, are another matter: it's not clear why they should be rewarded by the board, given that they are ultimately responsible for all divisions.

rapind 17y ago
This is a really good point and I'm actually familiar with the concept. It avoids profitable departments dragging along unprofitable ones in a large corp for extended periods of time (Pretty sure BCE is a good example of this). So I can agree that handing out bonuses to a successful department while the rest of the company drags the entire bottom line down can be a very good thing. However, here you have an unsuccessful business deciding to use their bailout money to keep who they believe are talented around by handing out bonuses. This reeks of mismanagement. There do exists companies that have tightened up their spending a great deal at the moment. Letting their employees know that they don't have extra coin to throw at them right now. If you are a crazy talented banker, and have confidence in the company you work for, and agree that they deserved to be bailed out, then you wouldn't take a big bonus. You would rather it goes back into the business so you could gain higher returns down the road (like long term employment and future real bonuses). On the other hand, if you are a crazy talented banker, and you have no confidence in your company succeeding, then you're probably going to take that bonus because you know you'll never see it again anyways.

rapind 17y ago

This is a really good point and I'm actually familiar with the concept. It avoids profitable departments dragging along unprofitable ones in a large corp for extended periods of time (Pretty sure BCE is a good example of this). So I can agree that handing out bonuses to a successful department while the rest of the company drags the entire bottom line down can be a very good thing. However, here you have an unsuccessful business deciding to use their bailout money to keep who they believe are talented around by handing out bonuses. This reeks of mismanagement. There do exists companies that have tightened up their spending a great deal at the moment. Letting their employees know that they don't have extra coin to throw at them right now. If you are a crazy talented banker, and have confidence in the company you work for, and agree that they deserved to be bailed out, then you wouldn't take a big bonus. You would rather it goes back into the business so you could gain higher returns down the road (like long term employment and future real bonuses). On the other hand, if you are a crazy talented banker, and you have no confidence in your company succeeding, then you're probably going to take that bonus because you know you'll never see it again anyways.