Wednesday, March 4, 2009

When is paying out bonuses warranted?

Teams win and loose together. The worst player on the Steelers still received a championship ring while the best players on the Cardinals still didn't. Similarly, The workers on the few auto production lines that actually still have "decent" sales are suffering along with all the other employees that worked on the worst production lines, right? Regardless of a business having 10 or 10K employees, a bonus is supposed to be something that can be given out when the business is doing well and is therefore paid is from profits. Paying extras out when you're losing money isn't a very good business model.

A clear distinction should be made between a company that needed a bailout and one that did not. If the only reason you're still a solvent company is due to govt funds, "your bonus" is the fact that you still have a job because without the govt money you wouldn't have been receiving "a paycheck" (let alone a bonus) throughout the end of last yr and even currently... However, if you didn't need a bailout then pay out whatever you want (even though it's wrong to pay a bonus when you're not profitable). A good argument can be made against the bonuses that were paid in the yrs that excessive leverage and bad decisions were creating "false profits" as well (i.e. the claw back debate) but for this that's another conversation.

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