AIG bonuses stir hornet's nest

Perhaps the worst news for the Obama administration has been the story about AIG's annual bonuses for its bailed-out executives. The Washington Post broke the story that AIG, which has received $170 billion in government funding since last fall, plans to honor a commitment to pay multi-million-dollar bonuses to the very executives that drove the company into the ground. It seems that before the federal bailouts began last September AIG promised $400 million in bonuses to its employees. Under pressure from embarrassed administration officials, AIG has talked the insurance company's 43 top executives into taking only half of their bonuses — $9.6 million — right away. The other half of these bonuses will be delayed until things quiet down a bit. Administration officials and more than a few taxpayers are outraged, and for good reason. AIG says the bonuses are a legal obligation. A contract is a contract, they say. Others might retort, a bankruptcy is a bankruptcy.

The AIG bonuses are not isolated phenomena. They reflect the whole topsy-turvy nature of compensation in this country. While millions of responsible, hard-working people are out of work in this economy, the people who precipitated the mess are being inconvenienced by the delay in their multi-million-dollar bonuses. Executive compensation has been out of kilter for decades. While wages stagnated or declined in inflation-adjusted terms, executive compensation soared.

And it's not just Wall Street bigwigs. Pay in the entertainment industry and in professional sports (maybe I'm being redundant) is outrageous. A single actor or actress commands millions of dollars for making one movie? An NFL quarterback can demand $10 million a year or more, and get it? Meanwhile, the people who do essential work that benefits society and makes life better for everyone — teachers, clergy, health-care workers, journalists, care-givers — can barely scrape by, or are laid off.

The AIG bonus scandal won't change this imbalance, but it might raise consumers' doubts about how compensation is calculated.