In the early 1980s, I worked for an investment bank that became among the first to crumble when the subprime mortgage market went bust. As an assistant to brokers, I was by no means high up in the firm. But I got a bonus at the end of the year — a couple hundred dollars — that I welcomed.
The word bonus is a Latin word that means good. That’s how I saw my bonus — as a good thing. The Merriam-Webster’s dictionary defines bonus as “something in addition to what is expected or strictly due as, (a) money or an equivalent given in addition to an employee’s usual compensation; (b) a premium [as of stock] given by a corporation to a purchaser of its securities, to a promoter, or to an employee; (c) a government payment to war veterans; (d) a sum in excess of salary given an athlete for signing with a team.”
In Africa and the Caribbean, it is standard operating procedure in produce markets to request a bonus of a vendor from whom one has made a sizable purchase, if such a bonus is not offered. It is the vendor’s way of expressing gratitude to the buyer for the purchase. Woe to the stingy one who does not offer it, or give it upon request. It’s a recipe for losing customers. The practice has migrated to the United States with immigrants from those lands. I myself indulge.
In all its definitions, then, the concept of the bonus is not displeasing. That changed in March, when all hell broke loose in the White House, on Capitol Hill and in the rest of the republic over the $218 million in bonuses that taxpayer-bailed-out American International Group gave to members of its disgraced financial-products unit.
According to the New York attorney general’s office, the top recipient received more than $6.4 million; the top seven each received more than $4 million; the top 10 received a combined $42 million; 22 individuals each received bonuses of $2 million or more, and combined, they received more than $72 million; 73 received bonuses of $1 million each or more; and 11 individuals who received $1 million or more no longer work at AIG, including one who received $4.6 million.
In the ensuing furor, Republicans lambasted Democrats for changing legislation to limit executive compensation at companies that received taxpayer money; Democrats fired back that it all started with former President Bush; an incensed President Obama declared the buck stopped with him. Within days, the House of Representatives approved, in a 328-93 vote, a bill that would apply a 90 percent tax on bonuses given to employees who earn more than $250,000 at any firm that received more than $5 billion in bailout money.
With the concept of the bonus now tainted and the population in no mood to hear the word mentioned, I would not be surprised if some companies seize the moment to do away with the bonus altogether.
Remember the investment bank I worked for? I once divulged the amount of my bonus to another assistant who worked for the same broker. She flew into a rage and demanded that the broker explain why I was given more than she was, when she had worked for him for more years than I had. The broker promptly cancelled both bonuses. Like AIG, the broker did nothing illegal. Whether their actions were ethical or morally upstanding is another story. How we reconcile the two — the legal and the ethical/moral — will define our financial industry in the future.