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Tuesday, July 28, 2009

A Few Quick Thoughts over the Bruhaha Over the Bonus of Andrew Hall

There's a business story causing some stirs in certain circles. It involves the oil trader Andrew Hall. Hall works for a subsidiary of Citigroup. He made this subsidiary, and by extension Citigroup itself, about $600 million in 2008. According to his contract, he is thus owed $100 million. Now, he's looking to collect.

And after placing a few multimillion pound bets on behalf of his employer, he is said to enjoy practising calisthenics with a ballet teacher.

But now, British-born oil trader Andrew Hall is at the eye of a deadly serious storm over Barack Obama's attempts to rein in the pay of America's top

Hall, 58, is in line for a $100million bonus from his employer Citigroup.

Normally this wouldn't be a big deal. After all, Hall is only asking for what his contract specifies he should get. Yet, these aren't normal times and Citigroup is no normal company anymore. That's because Citigroup took about $30 billion in bailout funds. As such, before Hall can get his bonus, the pay czar, Ken Feinberg, must approve it.

This is now the world we live in. Hall earned every penny of his bonus. He made his employer, Citigroup, a lot more than the $100 million he asking for. Hall is an oil trader. He bought absolutely no mortgage backed securities. He engaged in absolutely none of the business that got Citigroup into trouble. Hall had nothing to do with any of Citigroup's problems.

In fact, Hall, one could say, was a bright spot in an otherwise cloudy year for Citigroup. Yet, that doesn't mean the bonus he is entitled to will actually be paid. First, the pay czar has to approve it. Never mind that this bonus is written into the contract that Hall signed with Citigroup. Never mind that if Citigroup is unable to pay bonuses, they will cease to function. Before this successful oil trader gets money owed to him, Citigroup must get permission from the government. Does anyone else see this as totally absurd and no environment for growth.

What's worse is that some in the media are trying to demonize Hall for demanding what's his. I saw Stephen Moore of the Wall Street Journal last night suggesting that such a massive bonus shouldn't be requested from a company that requested bailout funds. Of course, the only way to have voided this contract was for Citigroup to file for bankruptcy. That didn't happen. They received a bailout. That means the contract is still valid. Hall deserves what he earned, and he shouldn't be demonized for asking for it even if his employer begged the government for money.

1 comment:

Anonymous said...

Another point to consider is the taxes due the UK govt.

If he gets his bonus, he'll have to pay, what, 60% to the crown?