The Detroit Free Press rightly points out that ChryCo execs are headed straight for the AIG bonus backlash.
Rep. John Dingell warned Chrysler Wednesday against paying more than $20 million in retention bonuses, and called for a 95% tax on all bonuses paid by companies receiving any money through the Troubled Asset Relief Program…
“While I recognize these are different from the AIG bonuses, it is still dumb for them to pay out these bonuses at this time,” said Dingell, a Dearborn Democrat. “Chrysler should think long and hard about the optics of executive bonuses, especially at a time when UAW workers and retirees are making remarkable concessions.”
And what, pray tell is that difference—aside from the fact that Cerberus’ automaker happens to do business in Dingell’s backyard? On Tuesday, ChryCo CEO Bob “The Prowler” Nardelli’s explained. And then explained some more.
Chrysler Chief Executive Bob Nardelli said Tuesday that the company’s top 25 executives agreed not to accept any new bonuses or severance payments as a condition for receiving government loans. Later, Chrysler said those waivers did not apply to the 2007 retention bonuses.
Uh. OK. And, once again, the Treasury Department’s in the soup.
The Treasury Department has approved that portion of Chrysler’s retention bonuses that most of its 50 top executives earned before Jan. 2, 2009, the company said in a statement. Chrysler paid 25% of the bonuses in February 2008. A portion, but less than 75%, will be paid this year, the company said.
Just when you’re ready to cash Uncle Sam’s check . . . .
There’s a slight logical fallacy here.
Chrysler want to pay these bonuses in order to “retain” talent at the company.
Well, wasn’t it these geniuses who got Chrysler into the pickle it’s in now?
Surely, they should be paying them “sod off” bonuses?
To do it with taxpayers money is just sheer class!
“Thank you america for loaning us the bailout money. With this cash we can reward American people with money they didn’t earn. God bless America!”
The law of unintended consequences always wins!
Chrysler top brass give up bonuses
March 18th, 2009
by Bill Cawthon
The top 25 executives at Chrysler LLC each have signed a waiver giving up any new bonuses or severance packages. The move was needed to comply with the conditions of the government-backed loan package the company received.
Chrysler still plans to pay substantial retention bonuses that were included in a plan set up in 2007, while the Auburn Hills automaker was still part of DaimlerChrysler. These payments have been approved by the Treasury Department.
http://www.allpar.com/news/
The 2007ish retention bonuses are just that, real retention bonuses so the execs would not leave as Cerberus took Chrysler from the Germans. They have nothing to do with the current bailout. And like AIG, they were contractual agreements with those employees. We all expect Automakers to honor union contracts, unless the union agrees to renegotiate, so unless execs want to renegotiate, Chrysler will have to fulfill the terms it agreed to. Unless congress writes a new (probably unconstitutional) law to allow the breaking for the agreement.
How did the corporate world manage to mutate bonuses from something paid to reward great results into something paid for just showing up?
Your salary is what you are paid for showing up. Bonuses are supposed to be for when the company is doing well and for when you made a significant above-and-beyond contribution to that success.
It still escapes me that an underperforming company pays anyone bonuses. If I don’t hit predetermined goals, I don’t get bonuses. How in the hell can a company that’s unprofitable pass out “‘attaboys”?
And Katie’s point that they should get paid to piss off is a good point. Don’t call that money a bonus, call it severence pay and get the douchebags that sank the company out the door.
I hate to break it to you, but contracts are increasingly not worth the paper they are printed on.
On a personal basis, intially, it started out slow. I signed on with the US military and was promised 4 years of GI bill for 4 years of active duty service. I used up 2 years of GI bill with a degree after leaving 4 years of active duty service, and intended to (some day) get a 4 year degree. A few years later, the Government changed the contract unilaterally; if I did not use the 3rd and 4th years by such and such a date, they would evaporate.
Essentially, what we truly had there is a situation where if I had broken my end of the contract (i.e. “I don’t feel like staying in the active duty miliary any more. I’m going home.”) I would have gone to Federal Prison. But the government can do what they please, and I have no repercussions? Correct.
This means their contract was not valid; a contract must be binding on both parties.
Therefore, I was lied to and essentially made a SLAVE for four years.
As for current day, well, looks like what I went through is happening on a grand scale to a lot of folks.
Look at the fact that soon (if not already), the government (through judges) can simply alter a mortgage CONTRACT and essentially make it possible to change the contract to benefit people who probably shouldn’t have gotten mortgages in the first place.
The law of unitended consequences is likely to come into play.
If YOU were the banker and it was your responsibility to ensure that there was some money actually coming in to pay the light bills, upon seeing the government doing this, how likely would you be to loan one red cent on a mortgage to anyone?
I believe that within a matter of months, mortgages will completely dry up in this country.
Essentially, the BO imbeciles are fomenting a crisis.
May I quote from http://www.independencejournal.com/today.htm
” when contracts can be voided at the government’s will, you could get to a point where systemic trust could break down. A most astute observation on his part. And systemic distrust seems a key in turning a recession into a Depression.”
windswords :
March 19th, 2009 at 10:03 am
The 2007ish retention bonuses are just that, real retention bonuses so the execs would not leave as Cerberus took Chrysler from the Germans. They have nothing to do with the current bailout. And like AIG, they were contractural agreements with those employees. We all expect Automakers to honor union contracts, unless the union agrees to renegotiate, so unless execs want to renegotiate, Chrylser will have to fulfill the terms it agreed to. Unless congress writes a new (probably unsontitutional) law to allow the breaking fo the agreement.
Exactly! Well stated.
My former employer did retention “bonuses” after a bankruptcy to maintain it’s core group of employees (management and non-management) to make sure the basics were still taken care of. Thankfully they did, as that was how I was able to obtain my final paycheck.
This cancerous bonus game has been going on for awhile now.
After entering bankruptcy and beginning to slash and burn it’s headcount, Delphi announced it would be paying Retention Bonuses to upper management to keep them from bolting for greener pastures.
When the Wall St. firms began to have poor results, they said that the bonuses they were paying were not for performance actually achieved (because the company had not performed well in the last fiscal year), but rather for performance expected to be achieved by current employees not bolting for greener pastures.
You know, most of these people in the finance and auto industries have signed non-compete agreements. Theoretically, of one of these folks went to “greener pastures” then their old company could sue them.
I’ve also been hearing the debate about how the companies need to keep top talent through this turbulent time. My argument is that companies like Delphi, AIG, etc. were completely run into the ground by these people, and the only reason for their existence now is gov’t support. It does not take “top talent” to ruin a company – I can take a bum off the street, pay him in empty pop cans, and he could run a company into the ground just as well as any of this “top talent.” And I wouldn’t pay him a bonus to do it.
Also, where are these folks going to run to? Would you hire one of these AIG idiots?
I’d hire an AIG idiot, who else knows how to get a couple hundred billion handed to you without any strings attached :) GM needs to hire a few, that way no more planegate issues!
menno:
Your contract involved the US government. The US is not a party to the contracts in question.
Contracts with insolvent companies have never been worth the paper that they are written on.
There is no such thing as “systemic trust” in real capitalism. Every contract has risk.
The idea that the government should guarantee payment on private contracts is socialist, not capitalist.
no_slushbox:
“The idea that the government should guarantee payment on private contracts is socialist, not capitalist.”
You got it wrong. It’s not socialist, it’s the rule of law. In Menno’s case, one branch of the government (the judicial) should hold the other branch of the government (the executive, if you believe that the military falls under that branch) to it’s contractural obligations. In a broader sense the courts (the government) are there to hold private contractees to their agreed to obligations.
windswords:
I was referring to issues of insolvency, you are misinterpreting me.
Yes, of course, between two solvent parties the courts should enforce damages if a contract is broken.
If you are solvent and owe me $10 then the courts should force you to pay me $10.
However, if you are insolvent and owe me $10 then the government should NOT say, hey, windswords can’t pay you, so here is $10 from the government.
That is what I meant when I said that the government should not guarantee payment on private contracts. Enforce it, yes. Guarantee it, no.
John Horner
“How did the corporate world manage to mutate bonuses from something paid to reward great results into something paid for just showing up?”
It’s gotten this way because management at most large corporations (and some small) spend a considerable amount of time dreaming up ways to extract money from the company without actually working for it.
I’m with John Horner. A bonus should get paid only when 2 criteria are met: (1) the company succeeded (i.e. profits went up) and (2)you contributed more to that success than most others.
In no way do any of these firms meet the first criteria. If they still pay bonuses, then they should at least have the honesty to call them “annual additional salary.”
Finally, a retention bonus should be for people who actually add value to the firm beyond what their traditional salary offers. If you are leader of the Big 3 or a financial firm on the verge of bankrupcy, then by definition you don’t fall into that category.
This is more evidence a system that has become corrupt to the point where it’s simply not fixable. BOD’s are friends of the CEO’s and on a mass scale, are unwilling to get rid of poor performers.
Hell, look at elected officials. Tim “TurboTax” Geithner has been on the job 60 days and he’s already a failure, yet no accountability for his lack of oversight or competence.
So Chrysler (and AIG etc) are worried that without the bonuses their talent will leave> I fail to see the problem, it’s hardly like there’s a lack of qualified and experienced people out there they can hire from – how about the amry of unemployed that’s growing daily. I’ll bet now that not one of them would ask for a signing or welcome bonus, and would probably work for a lower salary, and harder too as they have direct experience of not succeeding.
KatiePuckrick: “Well, wasn’t it these geniuses who got Chrysler into the pickle it’s in now? Surely, they should be paying them “sod off” bonuses?”
Katie, I’m pretty sure this sort of suggestion was raised years ago by the Right Honorable James Hacker, MP, Minister for Administrative Affairs, and was thoroughly rebutted, with respect and in the fullness of time, by Sir Humphrey Appleby.
In fact, I’d say that anyone who wants to truly understand how government policy is made should first watch all episodes of “Yes, Minister.” Or at the very least, the episode wherein Hacker learns why a hospital that has no patients must continue to be funded and kept in existence.
50merc,
For the record, I have all the episodes of “Yes, Minister” and “Yes, Prime Minister”.
However:
1. That was showing how UK government policy works. (All episodes were based on true stories)
2. This isn’t government policy. This is just a business trying to push its luck.
Like AIG and Citibank.
P.S. The best episode was the UK government had a diplomatic incident with the French government.