AIG Bonus Scandal Continues

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From The Hoss's Mouth

AIG has asked Kenneth Feinberg, the Obama administration's pay czar, to review a scheduled performance bonus payment of $2.4 million to 43 of its top-ranking executives. Money Magazine Hoss clearly recalls the public outrage that occurred in March when $165 million in retention bonuses was paid to top executives.

It is not clear that Feinberg, the person tasked by the Obama administration, with reviewing bonuses and retirement packages for the 100 highest paid executives at AIG, Citigroup, Bank of America, General Motors, GMAC Financial Services, Chrysler, and the defunct Chrysler Financial, has the authority to halt these bonuses. Some believe his mandate is only for current and future payments, not those delayed from 2008 (as these payments are) and therefore not only has no obligation to offer his opinion, but also no authority in the matter.

This would leave the decision up to AIG, and any resulting uproar would be laid squarely where it belongs: in the lap of AIG.

Money Magazine Hoss is of the opinion that if AIG executives would spend as much effort towards making AIG a viable company as they do in obtaining their retention bonuses, the tax payers may then have some hope in recouping the loans they made to AIG.

This smoke screen by AIG will not work. When honest hard working people are losing their jobs and life savings in increasing numbers there is no place for retention bonuses for already high paid executives. If these executives are that great, let them seek employment elsewhere. After all , it is these very same executives who caused the AIG financial catastrophe.

Stay on Track,

Money Magazine Hoss

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Calculating Operating Margin

From The Hoss's Mouth

Operating Margin

Money Magazine Hoss occasional will wager a dollar or two on the ponies (regular readers of the blog are well aware of this). Before investing a wager on a horse, he likes to measure the efficiency of each horse in the race using several different handicapping tools. For example, he will divide a horse's total wins by total races to obtain the horses win percentage and compare that figure to the other horses in the race. Wise investors also use several mathematical calculations to measure a company's efficiency before buying stock.

In his last post, Money Magazine Hoss showed you how to calculate Gross Profit Margin Percentage. This week, Operating Margin or Operating Profit Margin is explained. Companies with a high operating margin usually have lower fixed costs and better gross margins than their competitors. This gives them some flexibility in determining prices, which can be an advantage during economic down turns.

Operating Profit Margin is calculated as follows:

Operating Profit Margin = operating income (divided by) total revenue.

Money Magazine Hoss will again use the 2006, 2007 and 2008 income statements of Amazon, General Motors and Google.

Amazon's Operating Margin:

2006: $389,000/$10,711,000 = 3.6%

2007: $655,000/$14,835,000 = 4.4%

2008: $842,000/$19,166,000 = 4.4%





General Motors Operating Margin:

2006: $9,277,000/$207,349,000 = 4%

2007: $-4,390,000/$181,122,000 = -2%

2008: $-21,284,000/$148,979,000 = -14%





Google Operating Margin:

2006: $3,549,996/$10,604,917 = 33%

2007: $5,084,400/$16,593,986 = 30%

2008: $6,631,969/$21,795,550 = 30%


Now, Money Magazine Hoss is not a genius, but if this was a horse race, it wouldn't take a genius to figure out Google is the best bet, Amazon is worth a look, but General Motors should be put out to pasture.

Stay on Track,

Money Magazine Hoss

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