The fact that the US House imposes a 90 percent tax on bonuses for top executives at bailed-out firms like AIG will help to assuage and justify taxpayers’ anger about the lavish bonuses that AIG provided its employees at the expense of the taxpayers. With such strict, harsh and fearful measure, it will help to reinforce the regulations and maintain discipline in workers’ professional conduct.
However, the new tax legislation will also pose some negative consequences. Firstly, it will affect US government’s reputation as it will be seen as an abuse of authority by implementing such a ‘punitive’ tax. Secondly, the government will lose support from the financial sector as its employers and employees may not be willing to accept such unfavourable policy and drop out of the government's rescue programme. This will likely cause a freeze of the nation’s credit market and instability in the banking system, thus undermining the economic recovery efforts and worsening the financial crisis.
Overall, I think that there is a need for more reasonable and mature approaches by the government in dealing with the misuse of bailed-out fund. Coercive rules and regulations to control behaviours do not really solve the problem but just aggravate it. More importantly, there is a need for government to possess inspirational leadership to guide people to do right things based on moral values and principles despite this hard time. To quote the saying of Mr. Dor Seidman, the CEO of LRN which helps companies build ethical cultures, he said, “Laws tell you what you can do. Values inspire in you what you should do. It’s a leader’s job to inspire in us those values.” --- Elton Foo (0924)