How to Deal with Huge Bank Bonuses?
Banks will pay out more in bonuses in 2009 than any other year in history. Amid bailouts and special accounting gifts from government, some are feeling ripped off while others view the bonuses as just a cost of business. Here are a few viewpoints and solutions, and we’d love for you to leave yours in the comments section.
Government Owns the Banks, It Should Decide
The Trouble Asset Relief Program traded cold hard cash for ownership of banks or their assets. As such, corporations in which the government has a large interest should be at the direction of the government in how to compensate their employees. Without the government it is assured that most of these institutions would have failed, and they owe their commercial life to the government.
Bonuses and Wages Are a Cost of Business
From Wall Street to the community corner bank, bonuses are a great way to maximize the productive capabilities of employees. The Wall Street structure gives employees bonuses based on how much they earn the firm and without bonuses Wall Street may lose its top talent that feels underpaid. Though the 2009 bonuses are the largest in history, the stock market has added more wealth year to date and has made investment banks billions of dollars.
Tie Bonus Money to Company Performance
Businesses should peg bonus amounts to the growth and fiscal wellbeing of the business. Rather than get cash bonuses, bonuses should be distributed in stock or options that require a holding period before selling. This way bonus recipients will only earn money if the corporation does well. The most popular of the stock option/pure stock bonus structure allows for sales of stock 1, 2, and 3 years after it is distributed at a rate of 1/3 of the holdings each year.
We Want to Hear from You!
In the comments section below, tell us how you feel. Do you think bonuses are just a cost of business? Should government decide? Should bonuses be paid out in stock or stock options? How would you regulate bonuses (or would you at all?)
