By Tim Maier — AIG joins the likes of Lehman Brothers, Fannie Mae and Freddie Mac, all told they paid their executives $1.4 billion during a five-year span.

By Dennis Oakes

Clark Griswold earned a bonus every year. He got so used to the perk, after awhile he just considered it part of his salary. He even spent it on a down payment for a nice outdoor pool. Trouble is, as many fans of National Lampoon’s “Christmas Vacation” already know, Clark didn’t get a cash bonus. Instead, he got the gift that keeps on giving – The Jelly of the Month Club. His company decided to do what some companies failed to do this year – cut back on those bonuses. Clark then flies off the deep end with one thing on his mind – payback.

That payback feeling is what millions of Americans felt when they could not believe companies that they bailed out decided to give lucrative bonuses to executives whose companies reported millions in loses that wiped out the nest eggs of  average Americans.  But the anger just intensified with the “business as usual” attitude when corporations used taxpayer paid bailout to enhance executive pay.

QUICK FACT
Critics have argued that contrary to the public’s perception, Wall Street bonus pool actually shrank this year by 44 percent. That’s true, but it still remained the sixth-highest in history.

Insurance giant insurance giant American International Group (AIG) grabbed the $180 million in bailout funds to pay out $165 million in bonuses – until public outrage and tax legislation forced executives to pay it back.

Closer to home, Constellation Energy initially planned to pay out $32 million in bonuses and retention incentives until Mayo A. Shattuck III, Constellation Energy board chairman and his subordinates recently decided it might not be a good public relations move in light of a slew of complaints in Annapolis about high-priced energy bills.

Perhaps it’s time to scrap the entire executive bonus pay. President Obama suggests capping bonuses, and taxing those who failed to give them back. Not a good idea, claimed those CEO’s who said their high-priced executives will pack up and leave the country. Analysts argue for more transparency so shareholders can see those goals and objectives that trigger the million dollar perks. Australia says pay them in company stock.

But let’s take Obama’s plan one step further with a $1 million rule. Any employee who earns $1 million or more will no longer receive bonuses. Their contracts will be worked up front to include bonuses. It will be assumed that the employee will meet all the former “bonus” objectives. If the employee fails to achieve the quarterly goals, then their salary will be cut quarterly. Call it the old school method. Remember those college days when on the first day of class every started out with an A, and to keep that A, you had to do something that might seem foreign to some – work very hard.

FINANCIAL PROBLEMS
AIG joins the of Lehman Brothers, Freedie Mae and Freddie Mac, all who paid their executives during a five-year span $1.4 billion. Last year, all were close to bankrupt.   Imagine if the $1 million rule applied to athletes. The baseball player projected to hit .350 ends up hitting .250. Sorry his salary is cut after 45 games. The quarterback who is expected to throw for 30 touchdowns, but instead throws for six, gets scissors paycheck treatment. Face it we all screamed at the over-priced athlete who wasn’t carrying their weight but driving up ticket prices. We screamed it at former Oriole Albert Bell when he managed to squeeze a $50 million contract.

Problem is too many people like Clark Griswold feel they are entitled to bonuses.

“Executives whose companies are not performing should not get bonuses. Period. This sense of entitlement has to end,” said Rockville author Julie Lenzer Kirk and instructor with the internationally-acclaimed ACTivate entrepreneurship program at UMBC.

“Before I cashed out of my software company, I had to deal with entitlement in bonuses. It was very frustrating. That’s when we had to make it clear: you get paid your salary to do your job. A bonus is just that: a BONUS and should not be expected. In my book, “The ParentPreneur Edge: What Parenting Teaches About Building a Successful Business” (Wiley), I actually compare bonus entitlement to dealing with children who feel entitled.”
Some suggest trimming the bonus might be in order.

MONEY BAGS
> AIG had a $600 million bonus pot.
> They planned to pay-off $19 million to its former chief executive Martin J. Sullivan.
> They gave back the bonuses under a Congressional emergency legislation that levied a 90 percent tax on bonuses handed to executives and 35 percent excise tax on the corporations handing out bonuses who received bailout funding.

“Scissors are not a bad idea; running with them is,” said Lee E. Miller, author of “Get More Money on your next job.”

Miller says if a company fails to produce a profit, bonuses should not be given. “No excuses. Bonuses are not about hard work and effort. That’s why you are paid a salary.”

He advocates setting goals. “Giving bonuses on the number of loans you originate will encourage giving bad loans unless you only give bonuses on high quality loans.  Holding back a significant portion of a bonus and paying it out over time only if the loans are paid on a timely basis will encourage giving out good loans.”

Analysts argue the banking industry already has seen executives take jobs overseas because Congress capping bonuses and other corporate executives could soon follow. Imagine that AIG corporate officers will resign because they can do what they did here overseas.

And that’s a bad thing?

Clark Griswold didn’t fly off to Europe, he just asked someone to kidnap his boss until he got what he thought he deserved. Come to think of it, he did fly off to Europe in the prequel and destroyed parts of the country – knocking down Stonehenge. Europe be forewarned: Maybe those executives will be just as destructive overseas as Clark Griswold.

CLOSER TO HOME

Black & Decker
Nolan D. Archibald
Chairman, President and Chief Executive Officer
Salary: $1,500,000
Bonus: $400,000

Constellation Energy
Mayo A. Shattuck III
Chairman, President and Chief Executive Officer
Salary: $1,201,923
Bonus: $0

T. Rowe Price Group
James A.C. Kennedy
President and Chief Executive Officer
Salary: $350,000
Bonus: $0

JoS. A. Bank Clothiers
Robert N. Wildrick, (transitioning to Chairman of the Board Dec. 21, 2008)
Chief Executive Officer and Executive Chairman
Salary: $1,090,548
Bonus: $0

Under Armour
Kevin A. Plank
Chairman, President and Chief Executive Officer
Salary: $26,000
Bonus: $0

McCormick & Co.
Robert J. Lawless (retired Jan. 1, 2008 but continues to serve on board)
Chairman of the Board and Chief Executive Officer
Salary: $1,062,950
Bonus: $0

Source: Baltimore Magazine 2009 Salary Survey, Daily Record

— May 11, 2009