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Bailout Bonus Blues: Navigating The Obama Class War

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AP

The latest count of bonus money paid by AIG to execs exceeds $200 million and the outrage seems to be growing as the public’s awareness deepens.

One AIG exec, who told the New York Times that he was nowhere near the default swaps and other risky investments, expressed irritation and fear when he learned that his name and bonus had become public.

Despite expressing concern that the media would bother his neighbors, one such neighbor was delighted to see a reporter so she could blast her AIG neighbor and all the other bonus recipients. AIG officially warned all its employees to take precautions to avoid bodily harm from angry taxpayers, precautions like not carrying their company-issued tote bags and baseball caps. Goldman Sachs, which didn’t want federal bailout money but took it when Uncle Sam insisted, has spent the past few days defending itself for accepting owed monies from AIG.

I first blogged about a brewing Class War late last year and more recently in this spacein late January and again the next weekand sadly, my worst fears are coming true. And it’s only Act One in what will be a long, long play. All executives, especially those of us who are gainfully employed, should be very concerned about what’s happening out there, even as we may In fact be participating in stirring the pot. If you’re like me, you’re as outraged as the next guy by big bonus payments going to the same clowns who got us into this economic mess. But it’s also easy to see that you or I could be the next one tarred with the brush of anger and resentment.

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I say this because The Movement underway (and promoted, most of the time, by the Obama Administration) is not only opposed to bonuses for execs that contributed to causing the economic crisis. This movement is also suspicious of bonuses in general – high compensation, in general. We face the unfortunate possibility that a legitimate concern about troublemakers getting rewarded at “taxpayer expense” will spread throughout Corporate America and encumber the way good companies work.

In my view, the bonus – despite its bad name in 2009 – is one of the most effective and most American of all business tools for managing top performers and for being managed as executives. From Silicon Valley ventures to corporate giants like GE, from top law firms to the world of sports, outsized bonus awards have been a hallmark carrot in our capitalistic system. Outsized performance leads to outsized bonus awards (whether in the form of cash, stock or other benefits). I envision companies and their boards of directors going soft on bonus aggressiveness in the current climate, which could affect you and me in two obvious ways. One, our ability to give and receive bonuses will be restricted, which could make it harder to manage fellow execs and harder to feel good about our 70-hour workweek. Secondly, I submit that a more conservative bonus environment will inhibit innovation and effort, which will result in lower company profits, which is truly bad for everyone.

(Of course, there is the question of whether bonuses are truly tied to performance - which fits the model I’m describing - or whether the system is "rigged" at many companies to make sure that executives get their outsized bonuses no matter what. I’m really talking about the executive who sweats to make his or her bonus on a legitimate, measurable basis.)

Listen, I know full well that folks are “mad as hell and (don’t want) to take it anymore.” Me too. But beware: the non-executive class may not be able or willing to view The Bonus in a sophisticated, discriminating way in this environment. The pitchforks are out and the torches are lit. Really, I get it – but let’s hope we don’t throw out the baby (bonus) with the bathwater (the real ne’er-do-well’s who got us into this mess).

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Erik Sorenson is chief executive officer of Vault.com, Inc. Mr. Sorenson, 52, oversees the strategic direction of the global, New York-based media company. He is widely regarded as an expert on media strategy and industry trends, with experience spanning radio, local and network broadcast television, cable and syndicated TV, and the Internet. From 1998 through 2004, Mr. Sorenson served as president of the MSNBC cable news channel. He has won more than twenty Emmy awards as a writer, producer, and television executive.

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