Bonuses

The furor over American International Group Inc.'s million-dollar payouts to employees who nearly toppled the insurance giant is turning a spotlight on what critics say is frequently an abuse in the way corporate executives are paid. AIG is shelling out $450 million in so-called retention bonuses. Such payouts have been used for years to keep coveted employees from jumping ship during periods of corporate upheaval, typically caused by a merger or bankruptcy.

Given the degree to which the angst and anger about the economy is based on the public's confusion about the financial world -- just what is a "retention bonus," anyway? -- this might be the right moment to focus on something simple. Yes, I'm talking about bank accounting. Just kidding. Bank accounting is fiendishly complicated. Bankers have always preferred it that way, for it makes it easier to pretend that their institutions are solvent when they're not.

Bank of America Corp. has agreed to pay $33 million to settle allegations that it misled shareholders by indicating that Merrill Lynch & Co. would not pay year-end bonuses -- when in fact the bank had already approved up to $5.8 billion in payments. Federal regulators, who brought the suit against BofA, said the episode occurred as shareholders were considering the bank's proposed acquisition of Merrill Lynch last year.

Four of Google Inc.'s top executives each received 2008 bonuses of more than $1.2 million. The bonuses disclosed in a regulatory filing were less than the awards doled out in 2007 when Google's profit rose 37%.

Wall Street could learn a thing or two from 24-year-old video-store clerk Beatriz Corrales. "I love movies," she said from behind the counter at the Video Hut outlet in Hollywood's Franklin Village neighborhood. "If someone can't find a movie, I go and search the Internet for them. They could do it at home, but I'm happy to help." Surely that kind of going-the-extra-mile should merit some sort of bonus. Corrales laughed. "No bonus," she said.

It was a bad year to be an investor, but a great year to be a broker. Wall Street's five largest investment firms paid record amounts of compensation in 2007, despite the fact that three of the five firms posted quarterly losses as the result of souring investments in sub-prime mortgages. Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Bros. Holdings Inc. and Bear Stearns Cos. shelled out $65.6 billion in compensation and benefits last year, up about 8% from last year.

A judge said Tuesday that he would approve the bankruptcy exit plan of auto parts supplier Delphi Corp. after it drastically reduced the total payout of cash bonuses to top executives. The Troy, Mich.-based company's plan is a reorganization blueprint that largely shifts its manufacturing to cheaper overseas plants and eliminates tens of thousands of union jobs in the U.S.

Countrywide Financial Corp., which faltered earlier this year under the weight of soured mortgages, made a practice of doling out bonuses to employees who sold risky loans, California officials alleged in an amended lawsuit Thursday. The allegations expand charges made in a suit filed by Atty. Gen. Jerry Brown against Countrywide and several of its top executives in June.

U.S. taxpayers, who feel they own a stake in Wall Street after funding a $700-billion bailout for the industry, don't want executives' bonuses reduced. They want them eliminated. "I may not understand everything, but I do understand common sense, and when you lend money to someone, you don't want to see them at a new-car dealer the next day," said Ken Karlson, a 61-year-old Vietnam veteran and freelance marketer in Wheaton, Ill.

Howard Stern is making some Sirius money on the first anniversary of his satellite radio premiere. The shock jock on Tuesday became the stock jock with the disclosure that he and his agent were awarded $82.9 million in Sirius Satellite Radio Inc. shares as a bonus for helping the company exceed a subscriber forecast made when he was lured away from over-the-air radio.