House Passes 90% Bonus Tax

Rich Tehrani : Communications and Technology Blog -
Rich Tehrani
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House Passes 90% Bonus Tax

You may have heard the House of Representatives recently passed a punitive bonus tax bill for those working in companies which received TARP money. Specifically, The bill defines a new class of income, "TARP Bonus," that consists of any compensation payments in excess of a periodic wage and any income for such employees in excess of $250,000, or $125,000 for married individuals filing separate returns. Under the legislation, any "TARP Bonus" would be taxed at a 90 percent rate.

The bill now needs to be passed by the Senate and President.

I am in pain - two conflicting Rich Tehranis are killing each other in my brain. On the one hand there is the Rich Tehrani who is horrified that anyone who was partially responsible for the current financial mess get any bonus at all. The other Rich Tehrani is horrified that if the companies who received TARP money from the government can't give bonuses which match the industry they will lose the best people.

Then there goes the other Rich Tehrani who wonders exactly who on Wall Street, AIG, etc. had a brain to begin with. Then the other Rich Tehrani comes in and says there must be a few good people in all these companies - we can't paint them all with the same brush - right?

In the end, corporate America pay is out of whack. If your company loses money and you get a bonus more than $250,000 IMHO you are getting too much money. Then again, why would you deserve a bonus at all if you lose people money? I say this as a business person and a fair human being and as a shareholder.

I hope that compensation boards rework pay packages in such a way that CXOs and other executives get paid bonuses only when they make the company money in the short and long-term. I also hope we see more pseudo-clawback provisions using escrow accounts to ensure there is no incentive to use fraud or questionable accounting to get a quick bonus.

Let's take the time to rework executive pay packages across the board so we reward only the people who contribute to making companies successful.

But in the mean time we have to be careful as a country not to make the companies which owe us so much money go bankrupt because they lose all their best people. The trouble is this crisis makes both Rich Tehranis wonder what "best people on Wall Street" means.

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