Did you read the 3/25/09 Op-Ed in the NY Times "Dear A.I.G., I Quit!" Make sure you do. What a wonderful piece about the real scandal at AIG. The scandal that the few can make life miserable for the masses and that the masses (or the majority of employees at AIG) are completely innocent of wrong-doing!
The concept behind a bonus, or any kind of incentive pay system for that matter, is a combination of pay-for-play and reward. In this case, the staff in the AIG-FP department in this case was to be paid for their valued services to unwind and ultimately sell a part of the failed business. As the writer so eloquently stated, his department was immensely profitable and had hit profit targets year after year.
In most cases, a business that does not make its overall sales goals or profit goals should not pay out bonuses at all. I think we all get that. But what is buried in all this self-righteous posturing by Congress is that there are real people involved with real families and real responsibilities who, in good faith, negotiated deals with AIG to perform specific tasks for a reward. Now that reward is taken from them - and all because Cuomo in NY, Congress in DC, and various governmental talking heads refuse to dig into the details and refuse to honor contract law.
Believe me, there is no way AIG management (Mr. Liddy) thought that AIG would be profitable in March 2009 when the contracts were struck. In fact, I'm certain he was nearly 100% certain that AIG had substantial losses remaining. But he also knew that there were hard-working individuals who could contribute to repaying the taxpayers the monies borrowed by AIG sooner, as opposed to later. Retaining certain key individuals was infinitely beneficial to hiring anyone from outside - even if that outsider had the same skill set. It would take anyone hired from outside, assuming they could be quickly hired and acclimated, much longer to more ahead with the plans to sell off profitable AIG assets. Can anyone honestly say that those who contributed in this manner should not be rewarded?
Bonuses have always been about reward - bettering a sales target, profits in excess of plan, etc. Can anyone in Congress simply look at a dollar amount and say that those underlying individual payments are or are not warranted? No. Let's be serious. I doubt Congress as individual even understood the various business units that combine(d) to make AIG, the conglomerate.
We can all debate the merits of the steps Treasury et.al. have taken with regard to AIG. But what has been missed in all this is a corporation like AIG is made up of a critical and scarce resource: many talented people who gave 12 hour days to making their slice of the company successful. Let's all remember that when we condemn these high payouts ... one of those paid or not paid may be someone you know the next time. It might be you!
Send your comments and questions, as always!
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