Not a day goes by that we don’t see more than one tirade in the media about bonuses paid to corporate executives. Yesterday saw #44 displaying a bit of pique on the subject, a theme he had used frequently during the campaign. It’s an easy hook to hang a politician’s hat on, but it’s wrong.

First, compensation policies are contracts. If the government is providing funds to a company, there’s no reason why it can’t require, as one of the terms of such funding, that the corporation not enter into any contract that pays certain bonuses. On the other hand, it’s absolutely wrong for the government to expect or demand that a business break those contracts that it has already entered into. Certainly bonuses aren’t spelled out as concretely as some other terms of employment, but they are still part of the bargain struck when one person surrenders his productive hours and energies in exchange for monetary return. How congresscritters who are so reluctant to let a bankruptcy court adjust the interest rate of a mortgage can expect corporations to suddenly abandon their commitments is quite beyond reason. (Congresscritters often are beyond all human understanding, of course.)

Second, over the years we have seen thousands of cases in which businesses made decisions based on monomaniacal devotion to the current quarter’s returns, and millions of words have been written deploring this. The very businesses that are being assaulted most vociferously during this recession are the ones that were paying huge bonuses to those who had been motivated only by inflating the current results. If these businesses are paying out bonuses based on 2008 returns, during which they all lost their shirts, then the basis for those bonuses must have changed. This is progress, not something for which businesses should be excoriated.

Assume I’m including our normal royal commitment to the teaching of logic in these comments.