The following paragraph is from the book "Justice". It is about the 2007-08 financial crisis. The citizens thought the executives of AIG, who caused financial crisis, did not deserve the bonuses. What's the meaning of the word "compensation"in the paragraph? Does it refer to "bonuses"?

The worst case involved American International Group (AIG), an insurance giant brought to ruin by the risky investments of its financial products unit. Despite having been rescued with massive infusions of government funds (totaling $173 billion), the company paid $165 million in bonuses to executives in the very division that had precipitated the crisis. News of the bonuses set off a firestorm of public protest. This time, the public outrage was about lavish rewards subsidized with taxpayer funds to members of the division that had helped bring the global financial system to near meltdown. Something was wrong with this picture. Although the US government now owned 80 percent of the company, the treasury secretary pleaded in vain with A.I.G.’s government-appointed CEO to rescind the bonuses. The CEO replied, “We cannot attract and retain the best and the brightest talent,” “if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury.”

2 Answers 2


This usage of the word compensation is interesting. The first definition, as cited in the Cambridge English Dictionary online is as follows:-

Money that is paid to someone for something that has been lost or damaged, or for some problem.

This seems to be the original meaning. But more recently we hear of this different usage, related to payments to above all very highly paid employees. This CED defines as:-

the combination of pay and other benefits (=rewards) that an employee receives for doing their job.

Example: “Annual compensation for our executives includes salary and bonus under our incentive scheme.

Merriam Webster gives a similar definition.

How does the idea that someone has to be compensated for doing their job come about? Well, both dictionaries start their examples with a particular type of job: that of executives. We do not hear of miners or trawler men, police officers or soldiers receiving compensation, except when they are actually injured, a circumstance far more likely than for executives. The word is certainly associated with the payment of money, but in relation to ‘making up for’ an injury suffer in fact or law.

Could it be a kind of euphemism as the difference between the highest paid and the rest has grown? I suspect it is something like that. The word has this idea behind it that the person has given up or lost something into order to justify this (very large) compensation.

  • 2
    I decided not to mention in my answer that this meaning of compensation was until recently not found in British English. When I first encountered it, in the 70s or 80s, I was confused, because there was no mention of the loss or damage which was being compensated for.
    – Colin Fine
    Commented Dec 21, 2019 at 18:25
  • The word is, in fact, used in the sense of 'the combination of pay and other benefits that an employee receives for doing their job', for 'miners or trawler men', etc., in the contexts in which the benefits other that the wages or salary are important. This is often the case in the U.S. where such additional benefits play a more important role than elsewhere. The reason why the word is used in this sense for CEOs more often than for anybody else is that their salaries, in the strict sense, are often a small percentage of their overall compensation.
    – jsw29
    Commented Dec 31, 2019 at 19:35

It doesn't refer specifically to the bonuses. It refers to all that they receive in payment for doing their jobs, including the bonuses.

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