So there’s the whole tizzy about the AIG bonuses, but I’m not going to get into the rightness or wrongness of any faction’s actions or positions or whatnot.
What I’m wondering is…well, we need some appropriate nomenclature first, don’t we.
These bonuses are clearly not “bonuses” in the way I think most of us would think of bonuses. It seems to me that anything construable as a genuine bonus is also something that can be only expected outside the normal course of things. If you’re guaranteed a bonus, then to my way of thinking it’s not a bonus but instead, y’know, regular old compensation.[1] The case here, as I understand it, was such that the bonuses were nominally in lieu of regular compensation, but that’s just a stupid abuse of semantics–if you sign up for a $1 salary and a guaranteed $750K year-end bonus, then you’ve effectively signed up for a $750,001 salary, yeah?
But that’s not what they’ve done, and what I want to know is, why? What’s the benefit in contracting for a $1 salary + $750K bonus instead of a straightforward $750,001 salary? There must be some sort of advantage, surely; are bonuses taxed differently than salaries?
Again, I’m not interested in the right or wrong here; I’m genuinely interested in, and befuddled by, the why.
[1] “Guaranteed” here means “the guarantee of a non-trivial sum”, not “the guarantee of a percentage of profits” or other payout indexed to (corporate, division, or personal) performance. It seems to me that the bonus-like payments in question cannot possibly have been pegged to performance, as the performance of the entities in question was billions of dollars less than zero.