Fannie & Freddie to Pay Retention Bonues:
The WSJ reports that Fannie Mae and Freddie Mac expect to pay $210 million in retention bonuses over the next eighteen months. Even though the bonus amounts may be far less than sparked outrage at AIG -- some 7,600 employees could be eligible for bonuses, which would average out to less than $30,000 each -- they are already drawing political opposition. Here we go again.
If you give 5 people $3M bonuses each, it only lowers the average bonus of the remaining employees by about $2000 apiece.
I would like to see it a securities law issue if a company pays any employee or officer bonuses greater than 50% of salary in any given year.
Jealous?
Hey, I'd like it to be a securities law issue if a company pays you 50% more than my company pays me. I don't think that should be allowed.
Not really.
It is an issue over how the money affects financial forecasting, and a firm accounting conviction that one should call a spade a spade. The idea is that officers should be paid what the market will bear, but this should be reported honestly and not as "bonuses."
Doing it as bonuses skews financial forecasts, and that is my beef with the system. I see it as fraud against shareholders.
Why? Back-loaded compensation has certain properties that are quite useful and appropriate in certain circumstances. (Yes, most employees would have cash-flow problems with receiving most of their salary as a year-end lump, but ....)
95% of these employees have no reasonable expectation of funding another similar job elsewhere within a reasonable time frame.
This is worse than the AIG bonuses, which were contractually required as opposed to voluntarily awarded.
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