Jack Welch appeals for calm over AIG bonuses - good luck!
Former General Electric Co. (GE) Chief Executive Jack Welch, one of the most respected voices in American business, believes the American people should move beyond their outrage surrounding the bonuses paid to some American International Group Inc. (AIG) executives. Chances are that his advice will be ignored.The outrage over the $165 million in bonuses to 400 employees in its Financial Products Division is still raw. Many Americans are having trouble paying their bills are sick of spending tens of billions of dollars propping up mismanaged institutions. They can't understand why anyone should get a bonus who worked at a company that needed to be rescued by taxpayers at a costs of $173 billion over the past six months. Politicians are sensitive to this new realities and are responding.
Senate Banking Committee Chairman Christopher Dodd (D-CT) suggested that the government levy a tax on the New York-based insurer to recoup the money while his Republican counterpart Chuck Grassley argued -- apparanlty only half-kiddingly -- that AIG executives should follow the examples of Japanese samurai who killed themselves rather than face dishonor. Senate Democratic leader Harry Reader also wants to recoup the bonus money through taxation.
Even the Obama administration, which argued Sunday that they too were angry at AIG but felt that they had little chooice but to pay the bonuses because they were contained in employment contracts, is heeding the calls of the villagers and their pitchforks. President Obama said yesterday that he intends to stop the bonuses from being paid because the company is in dire financial straights because of recklessness and greed. Former AIG CEO Hank Greenberg called the payouts "mind-boggling." For its part, AIG is reducing its bonus pool for this year.
Questions remain whether the government has a legal leg to stand on. Also, proposals for a punitive levy of some sort could create an awful precedent. They seem of dubious legality too. But Welch makes the point that the federal government, which owns 80 percent of AIG, needs to work together with the company issues such as executive pay.
"They can't be public critics (second guessers) of their (and our) company," Welch wrote. "Tearing the institution apart with carping will not improve our chances of getting our money back."
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Reader Comments (Page 1 of 3)
3-17-2009 @ 1:32PM
Fx said...
The public outrage over $165 Million in bonuses out of a $173 BILLION bailout is a triumph of innumeracy and an emotional attention to trivialities over the calm reason that Jack Welch rightly suggests.
These bonuses paid this weekend are less than a tenth of a percent of the rescue funds -- basically the same magnitude as a round-off error -- and outrage over them totally misses the point. Shouldn't we be more concerned about the disposition of the 99.9% of the bailout moneys NOT paid in bonuses? The furor over the bonuses could be a way to keep us from seeing the big picture and asking the right questions.
Yes, it's very wrong if those at AIG who had a hand in bringing not just their company but the entire financial system to the brink of disaster are given bonuses. But I'm more upset with former Secretary Paulson and the Bush Administration, who structured bailouts for AIG and other companies without proper and/or sufficient oversight over the the way the moneys should be spent.
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3-17-2009 @ 4:06PM
widollar said...
But I'm more upset with former Secretary Paulson and the Bush Administration, who structured bailouts for AIG and other companies without proper and/or sufficient oversight over the the way the moneys should be spent.
Yes, this is the real problem and Paulson should be in jail for his actions!
3-17-2009 @ 9:25PM
AG said...
Your arrogance is astounding. Do you not realize this is why our country is in this situation. The lack of accountability for misuse of funds is astounding. Bringing attention to just one of the many made by the institutions may prevent other companies from such liberal use of our money.
3-17-2009 @ 1:48PM
John said...
The AIG bonuses average over $4 million for each for the 400 people involved. That a company would pay bonuses of this magnitude when they are receiving a $173 billion bail out is unbelieveable. Send me $1,000.00 of this bonus money. It would be a big deal to me and I'm sure most of the American public if you sent it to them.
Mr. Walsh, I respectfully submit that you have too much money to be in touch with the real world. You have lived the multi-million dollar rich life too long to understand.
When you need a $173 billion bail out now and probably more later, it defies imagination to pay out millions in bonuses. Bonuses should be based on profits not losses.
If the AIG employees won't work as hard wilthout the bonuses fire them. There are plenty of unemployed qualified Americans who can fill their jobs.
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3-17-2009 @ 2:17PM
Sally said...
In the report it was noted that AIG will "reduce its bonus pool" this year -- it should be eliminated entirely.
These 400 executives are receiving bonuses when in the non profit world (which pays much smaller salaries) employees are taking pay cuts so that their organizations can survive.
What's wrong with this picture??
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3-17-2009 @ 3:14PM
Dave said...
What is wrong with this picture is your belief that the government has the constitutional right to break a lawful contract between 2 parties. You should be more afraid of losing your legal rights because if the government can do this, no one is safe and that scares the hell out of me. That is the real issue here. Aig and the execs will take this to court and they will win.
3-17-2009 @ 6:48PM
Dave T said...
The Government is BAILING OUT these companies - all contracts should be null and void - LEGALLY. If not - no money. AIG should be made to fail and they won't have any money to pay their contracts and go bankrupt. Esentially abolishing their contractual obligation. If the Government is bailing them out then all employees and executives should have a freeze on these bonuses while the Government is in mopping up the mess. Hech - I don't think it is the Governments responsibility to mop up the mess anyway but to further state that it is against the law is absurd. Don't hold the Government to a different standard than the criminals who put us in this situation to begin with. The people getting these bonuses are criminals. They are getting bonuses for selling bogus and fraudulent products that made put this company in dire straits to begin with. THEY should be brought into court - regardless of a bonus. Seems you want the Government accountable to the law but not the real criminals. Let's have that day in court first. The Government has a responsibility to the people and if we can't stop these bonuses and irresponsible spending at these companies then we want all our money back NOW. Let's see what their employment contract is worth then.
3-17-2009 @ 2:37PM
Dinkar Kasbekar said...
Jack Welch is a product of greedy capitalism and he is wrong to ask 95% American to be calm when they are losing their homes, 401 Ks and are driven to bankruptcy by healthcare costs. I agree with some of the lawmakers that want to tax these million dollar obscene bonuses as a reward for failure -- contracts or no contracts!
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3-17-2009 @ 2:45PM
Jim Smith said...
I agree with Jack, but my real reason to write is I wish the media and the people would get this fired up about their Congress Men and Woman, we let them off the hook all the time. We allow them to stay in office over and over and some have no clue about whats going on!
I don't mean Wall St. or the business on Main St. what about the People's Streets.
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3-17-2009 @ 2:47PM
J BRAND said...
I CAN NOT UNDERSTAND WHY THE GOVERMENT CAN NOT STOP THESE BONUS PACKAGES WHEN THEY CAN ALLOW A LARGE COMPANY TO DO AWAY WITH HEALTH INSURANCE OR PENSION' S WITH THE STROKE OF A PEN IN NO TIME AT ALL.
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3-17-2009 @ 3:03PM
DLW said...
If the bailout didn't hapen how would they pay any bonus? As long as they are spending my money I'll decide who gets a bonus and I say no bonus until they show a profit after all the bailout is paid back. I sold cars for forty years and never received a bonus for not producing. Not producing usually meant firing!
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3-17-2009 @ 3:03PM
Andy said...
The average bonus payout is around $40,000 -- not $4 million! This still sounds like a lot of money, but not everyone getting a bonus was responsible for the financial troubles at AIG. There are plenty of non-executives getting their annual bonuses for the hard work they did over the past year.
Put it in context to yourself. If you worked for a bank or financial institution that was suffering -- and all you did was work hard and be a loyal employee -- would you want to give up your earned annual bonus?
Keep up the nasty attitudes towards these type of payouts and you will see your income cut too. Companies will be very leery when handing out bonuses this year.
Guess what the end result will be? Less money in the economy, less spending, and more unemployment. Be careful what you ask for -- you may not like the end result!!
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3-17-2009 @ 9:16PM
Paul said...
Actually, it's $400,000.
3-17-2009 @ 9:33PM
AG said...
Please, get a grip. I have taken a 30% pay cut to maintain my job, and my husband is laid off. Yes, I expect you to grow up and realize that if your company doesn't produce: THERE ARE NO FINANCIAL REWARDS! Life isn't fair nor ever has been. Bonuses should never be given unless goals are met. I would say my income should not be in your or anyone's pocket.
3-17-2009 @ 11:27PM
donna said...
you are a complete retard
3-17-2009 @ 3:04PM
Steve said...
Bonuses should be based on profits and job performance, not losses...period! If AIG claims to have made agreements with those employees without consideration of their profitablility...then those that drafted the language of the "bonus plan" should be fired and/or pony up their salaries to cover it! How ridiculous to think that our tax dollars are being used this way. If this goes through...I will certainly be pulling my business away from any financial institution associated with them. You can bank on that!
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3-17-2009 @ 3:20PM
Bruce said...
John, do the math. It's 412,000 each not 4 mil...Idiot..Good thing you're not in charge of my money..or maybe you should be if you're giving me an extra 3.578 million..That would be great!!!
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3-17-2009 @ 3:24PM
Andrew said...
Sure Jack feels that way. His background is from that type of position. He took his along the way.
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3-17-2009 @ 3:28PM
Steve said...
Jack Welch wants us to back off? Is he for real. Welch is a guy who made hundreds of millions of dollars at GE. When he retired he didn't want to spend any of his own money and wanted GE to continue to pay for his travel, dinners...you name it. Welch is no different than the greedy vultures under the current microscope. What an idiot who has absolutely no connection to regular folk trying to tell us to lighten up. Unfreakingbelievable. God, I hope Welch is reading these comments......get lost, loser.
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3-17-2009 @ 5:29PM
trim42 said...
C'mon you math majors...$165M divided by 400 is $412,500. Large chunk of change but less than 1/10th of 1% of total package.
Buy AIG and get your $$$ back.
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