First published in Singapore Enquirer.
It has been a year since Bear Stearns, one of the largest global investment banks and trading firms went under in dramatic fashion, sending global financial markets and economies into a seemingly never-ending tailspin. The massive capitulation expected from another spectacular failure of a globally interconnected institution forced the U.S. Government to step in and rescue AIG, the world’s biggest insurer, with a US$85 billion bailout in September last year.
Six months on from the dramatic bailout of AIG, details of bailout money use are made known but are far from being transparent. We now know that US$53 billion went to paying off its debts to foreign banks. Controversially, AIG felt compelled to pay US$165 million in bonuses to its staff in the financial products division – the very division that sunk the conglomerate, and the rest of the world with it, to its knees.
In the grand scheme of things, US$165 million is peanuts compared to the billions that have been poured into economic stimuli, rescue plans and t-loans. But the principle of the matter cannot be overstated. When individuals take unprecedented risks and are later rewarded for their failures through bailouts form the average citizens who do not have the luxury of such safety nets and exorbitant payouts, we are effectively rewarding incompetence and greed. The Merril Lynch bonus fiasco is another case in point.
I have written previously that when taxpayers’ monies are involved, we as taxpayers rightfully are entitled to some amount of accountability and transparency. I harp on this topic again as controversies across the Pacific Ocean are rearing their ugly heads in Singapore.
We have now learnt that two Northwest CDC staff were allegedly given 7 months of bonus and 1 month of AWS for their 2008 performance. We were also informed that only staff at the lower-end of the salary range who will receive a higher performance bonus range. If this were true, then perhaps the majority of us would be able to accept a structure that compensates for lower wage with more varying bonus structures. But alas, the Government and government-linked individuals are once again using their text-book “everything is aboveboard”, “this is not an NKF” reasoning, only to be found wanting later.
Eugene Yeo of the Wayangparty Blog has exposed the fact that the recipients of these bonuses were in fact senior managers; thus altering the structure from sensible to downright excessive.
CDCs are quasi-governmental bodies with the primary role of initiating, planning and managing community programmes to promote community bonding and social cohesion. No doubt some of their work is commendable; but they are ultimately responsible for managing the use of public taxpayer money to finance their activities such as community events and the dispersement of financial aid to the needy. Therefore, their key performance indexes should correlate with their bonuses and be the tied to the efficacy and accessibility of their social safety nets that they provide (i.e. public assistance, comcare…etc). Excessive reward for senior management that concoct elaborate schemes which are increasingly difficult to qualify for let alone survive on is ludicrous and has to be put to a stop.
President Obama is looking into legal options to rescind the bonus payouts of AIG. I hope our own President Nathan or PM Lee would do the same. Can we really do that? I say, in the spirit of Obama, yes we can!
The AIG staff had pre-existing contracts (prior to bailout) that mandated the payment of bonus. But so too did the U.S. auto workers that had to renegotiate their terms all in order to ensure they have an industry to return to after collecting their bonuses and pay checks. Similarly, CDC staff were paid for performances in 2008. But given the severity of the recession we find ourselves in, wouldn’t a larger reduction in the bonus pool and a lower cap for senior management be more prudent? Could the savings in 2008 bonus payout be then channeled into community programmes for the truly needy and these self-sacrificing servers of the community be judged and rewarded on how they alleviate the financial strains of the pre-existing poor and newly created poor? Otherwise taxpayers are made to fund these projects and salaries during booming times and even more so during trying times.
