Is it truly a fact that this problem cannot be unwound without these people? I have not seen detailed reasoning for why this is so. Surely records exist which can be used with or without their cooperation; are the records of these credit-default swaps not on the books?
Good question, and I don't know the answer. It is evident that the new AIG CEO (who again is serving the public in this matter without a salary) thinks he needs to keep these folks.
It was painful to watch him being insulted by pipsqueak congressmen out to capture a moment's exposure on the camera in a deceptive display of self-righteous indignation, when both they and he knew that what they were complaining about occurred before he took office.
As for the bonus issue, I recall that the word 'bonus' means different things. It seems that it essentially means 'lump-sum guaranteed payment,' not tied to the performance of the company, in the financial industry; whereas in your company I doubt that is true. Why is this done to such a degree in the financial industry? Cycloptichorn
Industries vary in their compensation practices - getting good employees is but one of the many ways in which enterprises compete with each other. Employees can be quick to run off with insider knowledge that can benefit a competitor or facilitate their own creation of a new competing company. Not always pretty, but certainly a part of human nature. In general it is very hard to keep good folks when they can do better elsewhere, particularly in good times which these are not.
Bonuses are usually called "incentive compensation" a euphamism sometimes misused by both employers and employees. Business sometimes make basic salary very small and make up for it with large potential bonuses for specific individual outcomes, in effect creating something like a piece work situation in which an employees work product earns him pay only if it sells (common in the financial industry): employees bid up bonuses and expect them even when they don't produce. My preference has always been to tie bonuses to company and division profits: we have very transparent monthly financial statements and most people can estimate their bonuses fairly accurately - I get motivation based on our bottom line performance: everybody wins.
We pay bonuses annually at the end of our fiscal year. Some companies, like Oracle pay bonuses both quarterly and, for senior execs annually. Partnerships and law firms typically pay very low guaranteed salaries, but distribute often fat profits to the partners usually on a quarterly basis. These organizations have little financial staying power and the shortest time horizon of all. Partner loyalty is usually low and law firms fail quickly in bad times, such as those at hand. (Hard to shed a tear for these guys.)
Some companies, particularly those in fast-growing industries, keep salaries low and pay bonuses in the form of stock options. In effect they are paying their employees a share of future earnings. If the company succeeds everyone wins. Microsoft did this for years, paying fairly low salaries but generous option grants. Many mid level employees who were there during the high growth years the 1980s and early 1990s retired early with millions. That all ended with the dot com bust of 1999.
Overall a very dynamic situation: in good times companies hustle and compete to keep good employees: in bad times employees hustle and compete to keep their jobs.
It's not easy to keep a business creative, adaptable, lean and profitable. Human nature seeks comfort, predictability and security: the brutal facts of competition limit their attainment. Only a very small fraction of the companies created in any year last more than twenty years.