President Obama and much of the country are outraged over AIG paying some $165 million in bonuses to their executives, considering that they've just posted the greatest quarterly loss of any corporation in history (something like $65 billion) and that the US government has handed them somewhere closing in on $200 billion dollars in bailouts. Plus, there'll likely be that much again.
"How do they justify this outrage to the taxpayers who are keeping the company afloat?" said President Obama. This violates "fundamental values" — as if a crooked demagogue Chicago politician would know a fundamental value if it bit him in his Hyde Park butt.
There's a pretty clear and irrefutable answer to the president's question: contractual obligation. Never having actually run a business, such things appear to mean little or nothing to Obama. Note the "cram down" rule he's trying to put through Congress to let judges arbitrarily rewrite mortgage contracts, for example. We won't have an economy at all if contracts are not legally binding documents but just suggestions that we might follow if they don't make anyone mad.
But he can't do a damned thing about it cause these executives have CONTRACTS. Those are legally binding obligations, and the company can't just decide not to pay them because it'll look bad if they do. If I were an executive that had a $500K bonus coming to me, I sure as hell wouldn't give it up just because it makes some people mad.
There's a strong general public sentiment against executive bonuses to companies getting government bailouts, but that's bad business going forward. If you've got a company that's in trouble, then they especially need the top talent. If you limit your company to paying execs a minimal wage, you ain't going to get the best and brightest you will desperately need to sort out the mess — though I grant you that this money obviously hasn't gone to any competent people at AIG specifically.
Then there's Senator Charles Grassley, who suggested that these executives should consider killing themselves to save face, like the Japanese. Really now — does Grassley have any room to talk? I don't know that we couldn't do without the AIG executives who've screwed the pooch, but I'm quite certain that the country would be better off if most of the Congress — definitely including Grassley — jumped off the top of the Washington monument to atone for their sins. They've screwed the pooch way more than even AIG — and they're the ones ponying up the money to keep AIG in business so that a bunch of European banks don't get screwed.