[bjeds]

"Company X got state aid and paid Y in bonuses" seems to be one of those cookie cutter news reports that pop up several times per day the past year. The titles seem to imply that state aid directly went to a few senior executives. Outrage, right?

But why not look past the knee jerk reaction?

1) In most cases I'm aware of, after digging deeper, you find out that the state aid is not for the company - it's for the employees. Running a business is no charity and if you have employees that are superfluous due to current market situation you lay them off unless the cost of retraining future employees is higher than paying operating expenses to have employees around that are not working as much as they used to. State aid can affect the decision by offloading expenses to the state, for employment safety.

2) Bonus payouts may be for last year performance and not related to either covid or the state aid at all. Just because you have two large numbers within the same order of magnitude doesn't mean they are related. Bonuses may have been paid of regardless of state aid.

[ocdtrekkie]

I think what's really crazy here is that Booking.com would rather lose €65M than not pay executives €28M in bonuses (for a total loss to corporate coffers of... €93M?).

Sure, state aid is "for the employees", but in most of these cases: The company obviously could've paid them anyways, since they had this much spare compensation for their rich executives, and that the company continued to benefit from the labor of employees that the government was paying the salaries for.

The government, and by proxy, the taxpayers, end up doubly screwed over, while the corporation gets to continue to enrich itself, and enrich its executives, who are already wealthy.

Rather than give corporations huge blank checks, governments should've sent that money directly to individuals, and allowed corporations to fail or not as per usual. Most of these companies would still exist anyways, since they have plenty of money.

[gareim]

Money is fungible. Aid that goes to paying non exec employees frees up money to be used for bonuses, so aid went to bonuses.

I think people are more mad at the idea that companies that didn’t need aid got aid.

[itake]

I can't speak for this situation in Europe, but with the US PPP loans, companies basically had 2 months of their payroll paid for. This also means that got 2 months of free labor.

With the no payroll costs, where does that "extra" payroll money that would/should of gone to payroll go? Investors? Executives?

[nickff]

Well, a great deal of the money was to forestall layoffs; discount-rate labor doesn't do you much good if you don't need it.

[arp242]

You're correct that the state aid was intended for employees, yet it was given to booking.com and not on the people's personal bank accounts. They were more or less free to do with that as they saw fit; the only condition was that they couldn't fire people for 3 months (did did fire ~25% of the work force after those 3 months).

In this case, they changed their own rules regarding bonuses on account of being an exceptional situation and that, apparently, these bonuses were desperately needed. How many of those 25% of people could they have retained if they didn't pay millions in "desperately needed" bonuses (not all were in shares btw)?

The original reporting[1] was fairly detailed with specifics, subsequent reporting left out some that; you know how these things go... There is some nuance here, but it's still leaving a really bad taste in my mouth.

But to be fair, I find it hard to blame just booking.com for this because it's the entire culture that's just rotten IMHO. It's all "free market" this and "no government interference" that but then also "plz government help us" when things go belly-up. When people point out the hypocrisy it's "for the employees, not the company!" True, but misses the larger picture IMO. "Running a business is no charity", well apparently it is because the tax payer will happily get you out of trouble with the "but think of the employees!" emotional blackmail argument only to have them turn around with "free market!!!" a few months later while swimming in their obscene and unnecessary stacks of money.

And to be clear, I'm actually quite in favour of the free market and capitalism (moderated to some degree), but this doesn't strike me as either.

[1]: In Dutch: https://www.nrc.nl/nieuws/2021/05/27/booking-paste-bonusrege...

[kgantchev]

On top of that, it looks like the bonuses were not cash but mostly company shares. I don't see what's the problem with that...

[GordonS]

Shares can easily be exchanged for money.

Paying execs huge bonuses (whether in cash, gold, shares or whatever), while taking huge sums in state aid and laying off thousands of employees is morally despicable behaviour at best.

[kgantchev]

It does matter what they got paid in. If they got paid in anything other than shares, I would agree. But the point of shares is that it aligns the economic incentives for the executives and the company. Shares are directly dependent on the economic success of the company. And the ability to employ people and pay them salaries is also directly dependent on the economic success of the company.

If they sell shares and pay employees, then they're not helping the long-term sustainability of the company and its ability to continue hiring people and paying them.

[Aeolun]

The optics are the problem. Lay off thousands of people, and get paid huge bonuses?

[kgantchev]

It is, for people who don't really understand how company, executives, and employees incentives align.

[mypalmike]

Why does the asset class matter?

[kgantchev]

It matters what they got paid in. If they got paid in anything other than shares, I would agree. But the point of shares is that it aligns the economic incentives for the executives and the company. Shares are directly dependent on the economic success of the company. And the ability to employ people and pay them salaries is also directly dependent on the economic success of the company.

If they sell shares and pay employees, then they're not helping the long-term sustainability of the company and its ability to continue hiring people and paying them.

[mantas]

So without state aid they would pay out bonuses but not regular pay to employees?

[Okkef]

They didn't need it but made use of it anyway. This is not a matter of rules, but of ethics