I am really astounded by the backlash on the AIG retention bonuses. It may come from having actual experience in corporate America (I chair the comp committee of a NYSE company and have sat on boards of directors of public companies for more than a dozen years).  Most of the people weighing in on this issue seem not to have a clue about the ubiquity and reasonableness of such plans.

These are not bonuses based on performance — which is what we usually think of when we hear the word bonus: a reward for good performance.  These are financial incentives being given to people to stick around as a company is unraveling and the employees have safer and possibly more lucrative opportunities elsewhere. You often see such bonuses put in place when companies are about to go into Chapter 11 and bankruptcy judges usually approve them, with creditors’ assent, because without them you would lose key employees critical to reorganizing the company.

I don’t claim to be an expert on AIG’s problems.  But it seems to me entirely reasonable that the company needed experienced people in their Financial Products division to try to unravel the credit default swap mess.  The geniuses that got the company into trouble in the first place when these instruments were set up (and their risk not properly understood) have long gone.  Those employees left in the division, however, are still necessary to ensure that the company not implode but wind down in an orderly fashion.  And the U.S. taxpayer now has a direct stake in seeing this happen.

Congress has now decided to scapegoat these employees and is doing so in ways that will cause enormous harm.  There is plenty of blame to go around in the current financial mess, but Congress shares some significant burden in this regard.  The idea that Barney Frank is trying to tell anyone how to run a business is ludicrous.  Most politicians couldn’t assess a P&L statement if their life depended on it. Many of them have been on public payrolls or in the non-profit world all their lives, starting with the president.  This whole thing is not only unseemly, it’s dangerous.

Greed is certainly a vice; but so is envy. And the latter is not only one of the Seven Deadly Sins, it happens to be forbidden by the Ten Commandments.  We’re not going to be better off if we get rid of excessive greed but replace it with something just as unsavory.