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Why Bonuses?

Tuesday, April 14, 2009
Somewhat lost in all the brouhaha over huge wall street bonuses for failed company executives is the simple question - why are these people eligible for bonuses at all? Ever? I can understand a little extra pay around the holidays or for someone's birthday. I fully support fringe benefits. I can even be persuaded on giving employees a share of stock so that they benefit directly from the company's general growth. But why in the hell should already well-recompensed executives receive huge additional sums of money as a matter of course? Beyond this, is it really a good idea to give stock brokers a share of commissions on the sales of stock, rather than just the additional earnings? That just seems to lead to pointless paper-shuffling without an eye to solid long-term investing.

I suppose that the managers of said companies would claim that these "highly skilled" employees need the extra money or else they'll go work someplace else. Sorry, but that argument doesn't wash. First, that's an argument for higher pay, not bonuses. Second, it suggests a serious collective action problem, not a reward for superior merit.

So my question remains, why bonuses? Until I get a good explanation, I'm going to support restricting, regulating, and taxing the beejeezus out of large bonuses, cause from where I'm sitting I don't see the justification for them at all. Particularly when they're being paid by citizens who are making 8 bucks an hour.
Posted by Arbitrista @ 7:49 AM
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