Bureaucracy – Unreasonable bonuses for executives

Executive Bonuses. Do they really deserve them?

The worldwide financial crisis of 2008 resulted in the collapse of many companies in the USA, some of which were helped financially by the government to prevent bankruptcy and probably massive unemployment. Due to the financial help, these companies could achieve extraordinary profits, which were distributed as bonuses for their senior executives. At the same time, lower-end workers did not receive bonuses and some were left unemployed. To what extent did these senior executives deserve those bonuses? Weren’t they responsible for the company going bankrupt or was the market system as a whole accountable for that?

On February 2009, President Obama attempted a solution by imposing a limit of $500,000 on these bonuses. Another possible solution in the long-term would be to encourage the development of more powerful companies and therefore have a more competitive market. There are skilled professionals out there that can do this but the barriers of entry are very high. In the short-term, the solution would be to increase the taxes on profits, which is reasonable given that the government itself helped these companies gain profits in the first place.

Further reading: Alternative Solutions