While Fairfield students struggle to pay the $50,000 to attend the University, a few minutes away, Douglas Poling of Wilton, Conn., received a $6.4 million bonus from A.I.G.
Few people seem to know exactly what is going on, even business students. But from a liberal arts perspective, first bankers and mortgage lenders made loans that they expected to sell to investors through securities. Financial insurance agencies and federal regulators blessed the process and Federal Reserve Chairman Alan Greenspan assured that the government would remain hands-off.
Executives have continually rewarded themselves for supposed superior leadership. Not until now has this practice drawn such public scorn. It took a recession for people to voice their indignation.
The public outrage over executives rewarding themselves with taxpayer money has led Congress to impose a 90 percent tax rate on the bonuses as well as some of the executives to return to the money.
But, the problem is not just about the bonuses; it is the sense of entitlement felt by Wall Street executives.
According to Floyd Norris, the chief financial correspondent of The New York Times, salaries of more than $1 million are not tax-deductible for the companies that pay them. But unlimited amounts are deductible if the money is claimed to be performance-based payment, so companies give salaries over $1 million as a ‘bonus.’ The executives see these bonuses as part of their compensation.’
These bonuses have been justified by executives in that they state such rewards are necessary in order to keep the top management from leaving. But why should they be stopped from leaving? Their reckless behavior created short-term numbers that allowed the companies to claim success, but in reality, they set the economy up to fail.
Congress also played a role in this financial mess. The bill that passed imposing a 90 percent tax only applies to companies that received more than $5 billion in bailout money. And even worse, the companies awarding bonuses are doing so legally; Congress enacted October’s $700 billion bailout without including fraud provisions.
The selfish behavior of CEOs has long been a problem, but it is not only their fault. The government enabled this behavior and no one questioned the results when the economy seemed to be going strong. But the recent troubles have brought all the concealed problems to light.
The outgoing senior class faces one of the toughest job markets in recent years. But there is hope that they have learned from their Jesuit education how to juggle business success with morality.
Leave a Reply