Which is more byzantine: the underlying value of a derivative or the compensation agreement for those who trade in them? It appears there's nothing to prevent paying bonuses to the executives who nearly destroyed AIG because the recipients all have contracts. AIG has assured us that bonuses for employees in other sectors of the company have been cut or eliminated. If I understand this right, that means people in the company's profitable sectors are getting punished while those in the financial products unit that lost untold billions are being rewarded...with taxpayer dollars.
The explanation we hear from all bonus paying companies is the same: they must pay them in order to attract and retain talent. Without bonuses, their key employees might jump ship. My question is: jump where? This is a recession, remember? Banks and financial firms are going belly up right and left. Who's there to hire them, much less pay them in the manner to which they are accustomed?
Meanwhile, there's new talk of merit pay for teachers. The idea is the same: to attract and retain talent. The problem is, that at the very time when this is being discussed in Washington, thousands of teachers are being sent pink slips in almost every state. Morale among the new teachers that I mentor took a body blow this week when they all received notices. The bonuses paid to teachers are paltry compared to those paid on Wall Street (I know because I get one), but they're worthless if the nation is not committed to keeping its schools fully staffed.