I can’t help but read every story about this $165 million in bonuses that AIG insists it has to pay despite the fact that it recorded the largest quarterly loss in history in 2008. Ah, what was it. Oh yea, $62 billion! Is it any wonder people just can’t accept that bonuses are justified for this company?
Many Americans are under some type of compensation plan that includes bonuses so there is some basic understanding of how these are suppose to work. Sure there are lots of different types of bonus plans: ones for sales, long-term, short-term, stock-based, profit-sharing, individual, group…… But most large companies have senior people in charge of designing these bonus plans with Board committees overseeing compensation and they usually have some type of weasel wording that gives the company the right to change, cancel the plan in cases like…. oh, I don’t know, how about the company loses so much money it needs the US Government to take over and give it billions of dollars just to operate. You know, those kind of extenuating circumstances. But it seems, AIG had none of that for its bonus plans. And there doesn’t seem to be anything like reasonable explanations coming out of AIG for any of this. That is what is making people mad. They can’t seem to justify anything that they are doing or have done. Which begs the question. Is this actually less stupidity and more malicious intent on the part of the company’s leadership?
It now seems that the bonus plan was as irresponsible as it appeared on the service. The Deal Professor wrote about the AIG bonus arrangement in yesterday’s NYT and it confirmed that these are NOT performance bonuses. They appears as if they were written by the recipients rather than the company. So, where is the VP of HR? Where is the Boards Compensation Committee? They are the ones that should be held responsible for these bonuses being paid.
I don’t know about everyone, but my bonus was cut by more than half this year and my company made lots of money. We just missed our targets. I have heard similar stories from other “regular” companies. Companies not involved in the credit crisis. We are all worried that we won’t have jobs tomorrow. Yet here is THE company at the heart of the crisis, their London office responsible for writing billions in Credit Default Swaps without proper capitalization or reserves. They were doing nothing better than running a scam. Taking in premiums and not setting aside proper reserves to pay claims. People have every right to be outraged by this scandal.
On a positive note, we should thank AIG for being the poster-boy of corporate greed, incompetence and individual moral bankruptcy. Ahh, free enterprise!