Memo to comp cop: Cancel AIG's latest big buck bonuses
Filed under: Company News
American International Group (AIG) is seeking more bonus money for its executives. You might remember AIG because as a taxpayer, you've given it $180 billion in your money to keep it from collapsing last fall and your money went to pay $165 million in bonuses to 400 employees of its catastrophically money losing Financial Products unit with another $200 million in the works for 2009. Of course, AIG is trying to deflect public outrage for its latest $2.4 million in executive bonuses onto the new comp cop, Kenneth Feinberg.
This might be good politics but it turns out that since the bonuses were approved before Feinberg started his job, they're outside of his jurisdiction. Do the AIG executives deserve bonuses? I think they certainly do -- as long as AIG is making a profit it should have the right to pay bonuses to its executives out of that profit. There's just one little problem -- AIG lost $99 billion in 2008 and $4.4 billion in the first quarter of 2009. That's a monumentally lousy performance which does not warrant a bonus.
Larry Summers has defended these bonuses by saying you can't just abrogate contracts. But those contracts were made before the U.S. became the majority owner of AIG -- with 78 percent of its shares -- and its board has an obligation to look after the shareholders. So it seems to me that the U.S. has every right to use its new-found control to renegotiate those contracts so executives get bonuses if the company earns a profit.
If the AIG executives don't like it, they can leave. It's not as if they're generating enough profit to justify paying themselves any bonus. If they are so talented, they should have no problem finding another company eager to hire them.
And if there are no financial services firms eager to pay for their skills at destroying huge companies -- that's how free markets should work.
I think the comp cop should draw a line in the sand and stop paying millions in taxpayer money as bonuses to executives of companies that lose billions of dollars.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He owns AIG and Citi shares.
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Reader Comments (Page 1 of 5)
7-10-2009 @ 8:46AM
kdnorcutt said...
HERE WE GO AGAIN WITH THESE STUPID BONUSES . i LIKE THE COMMENT THAT THEY HAVE TO PAY THESE RETENTION BONUSES BECAUSE THESE PEOPLE ARE HEAVY HITTERS! WHAT A JOKE IF THEY WERE THE HEAVY HITTERS YOU STATE THEY ARE THEN YOU WOULD NOT HAVE NEEDED GOVERNMENT BAILOUT FUNDS,YOUR COMPANY WOULD NOT BE IN TROUBLE.
A HEAVY HITTER TO ME IS AN EMPLOYEE THAT CAN MAKE GOLD OUT OF MUD,WALK ON WATER,AND DO AN EXCELLENT JOB FOR THE COMPANY.THAT PERSON WOULD DESERVE A GOOD SALARY AND BONUS PACKAGE. THIS IS WHAT IS WRONG WITH THIS COUNTRY,OVER PAID CEO'S, ITEMS BEING TRADED ON WALL STREET THAT HAVE NO BUSINESS BEING THERE(OIL,AND GAS). STIMULUS PACKAGES THAT HELP BIG BUSINESS AND NOT THE AMERICAN PEOPLE. IF ALL THE MONEY ARE GOVERNMENT SPENT ON THIS STIMULUS PACKAGE WAS GIVEN TO THE PEOPLE INSTEAD OF BIG BUSINESS OUR ECONOMY WOULD BE ON ITS WAY TO RECOVERY. BUILDING OR REPAIRING THE ECONOMY IS LIKE CONSTRUCTING A BUILDING. (START WITH A FOUNDATION) WHO EVER HEARD OF STARTING A BUILDING BY CONSTRUCTING THE ROOF AND HOPE IT STAYS UP LONG ENOUGH TO GET THE WALLS UNDER IT! THIS COUNTRY IS CONTROLLED BY A BUNCH OF POLITICAL ASS***** REPUBLICAN AND DEMOCRAT. WE NEED TO FIRE THE WHOLE LOT AND GET PEOPLE IN THAT CARE ABOUT THIS COUNTRY AND IT'S PEOPLE!!
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7-10-2009 @ 11:08AM
mocrsec said...
I am so in agreement with you on this one. The government needs to stop trying to save these businesses that do not know how to run a business and start paying attention to the people who are losing their jobs and homes. We need to start doing something for the American citizens and not the businesses in the world. If a business fails because they do not know how to run it, then so be it. That goes for banks as well.
7-10-2009 @ 2:18PM
maximum joe said...
Lets give billions to the very people that f@cked up in the first place, that will fix the economy! Great call Nobama. I'll be surprised if there is a country left when this comunist gets voted in 2012.
7-11-2009 @ 10:16AM
Jerry said...
Amen. I believe you hit the nail on the head!!!
7-16-2009 @ 8:09AM
madkisser said...
Only ignorant stupid people posting their whole comments in capital letters. No matter how brainy, smart and excellent your thoughts are, the viewers will bypass it. Because it is farfetch brain damage just to look at. Typing your comments in capital letter throughout means that you are yelling.
7-10-2009 @ 9:04AM
Ann Crownover said...
When will this end???? I thought this was over with the last round of bonuses. I agree that if an exec is not doing well and the company is losing money, there should be no bonus (and one would think this is a no-brainer). I also do not want the American people to become complacent, constantly hearing about these "rewards" until we get tired of it and stop trying to hold people accountable for this farce. The end result of this should be: no bonuses now, and NO BONUSES EVER AGAIN until such time this company may ever (?) show a profit.
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7-10-2009 @ 9:19AM
DONDAVY said...
GIVE THEM THE BONUSES,TAKE TAXES OUT RIGHT OFF THE TOP AND THEN FIRE EVERYONE OF THE F##KERS
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7-10-2009 @ 9:29AM
copterdude said...
There goes another $180 billion of our hard-earned money down the crapper.
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7-10-2009 @ 9:49AM
Dave said...
You can thank chris Dodd, the senator from that great state of conneticut for voting to allow these bonus'es. He was in charge of the banking committe when this went through.
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7-10-2009 @ 9:49AM
Purecountry495 said...
I feel as long as taxpayers money is still not repaid, then there should be no bonuses. Also no one should be getting higher compensation than the President of the U.S., until all BAILOUT monies are repaided. If our gov't just says no more bonuses, they will just raise their salary structure to skirt the bonus issue. AIG executives should be thankful they still have a good paying job, thanks to taxpayers money. If AIG went under instead of getting bailed out, those same executives would be still unemployed or earning alot less if they was lucky that someone else would give them a job on Wall St. If they don't like not getting bonuses or salary's reduced they are free to look elsewhere for a job, just show them the door.
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7-10-2009 @ 10:02AM
John said...
Somehow, the word bonus reminds me af the word "reward." I'm watching my small business go down the tubes during this "recession," but I can't get a bonus... I didn't cause any losses at AIG, and I can't get a bonus.. These turds helped run a large company into the ground, and they get a reward??? Give me a break! Let them go to work at Hartford, or Travelers, or Citibank. If they are so good - why is the federal government overseeing them? This is a money grab, pure and simple.
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7-10-2009 @ 10:02AM
Sam said...
It seems to me that this insurer should remember it is operating under new rules now that it has accepted a tax payer handout. This is a type of "soft" bankruptcy. If the bailout had not taken place these executives would not be considing these bonuses due because there would be no company to pay them.
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7-10-2009 @ 10:36AM
dajt57 said...
blaming the investors gets you a bonus? 99% of the managers i have met in my lifetime are idiots who wouldn't know how to manage if their life depended on it. and aig collapsed, the company failed. you get bonuses for that now? jeez.
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7-10-2009 @ 10:37AM
New Government Employees? said...
It seems like these new government executives took no time at all to learn the do nothing atmosphere ever so prevalent in giving bonuses for non or lackluster performance. How long will it take them to learn how to rip-off their employers as well as their peers in the house and senate do?
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7-10-2009 @ 10:48AM
jwoodb2 said...
There was a good reason for lynch mobs in the old days. It was when the punishment fit the crime and the crime was against the people, not just one individual. What would you consider a modern day lynch mob? How can we vent our frustration at the absolutely assinine way our govt and the management of AIG is dealing with this? My feelings are that we must DEMAND the heads of this firm on a platter and NO BONUSES...If it isn't enough that you any job at all, go away...You're fired or quit! Only when a company can show an overall profit is a bonus warranted. Management should be PENALIZED for this type of performance, not rewarded. Can't even begin to express my anger and disappointment in our congress and leaders. Shameful.
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7-10-2009 @ 11:13AM
gwat said...
If Peyton Manning leads the league in passing, and triggers a 7-figure bonus, but the Colts don't win the Super Bowl or worse, don't even make the playoffs... does he still get his bonus? Yes. It's contractual.
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7-10-2009 @ 4:08PM
DR said...
You are ate up with the dumb a$$! Is Manning being payed out of tax payer money dummy?!
7-10-2009 @ 8:42PM
kelly said...
It may be contractual but I believe most bonuses received by pro ball players is based on performance. If manning didnt lead the league in passing but still won the Super Bowl then he wouldnt get a bonus.
Show me where these yahoo's performance justifies a bonus. You are comparing apples to oranges here.
7-10-2009 @ 11:38AM
Iggie BigBalls said...
Pay 'em the bonuses at 100% - even offer 'em extra! Then tell 'em they're gonna be taxed at a special 125% tax rate until the company recovers and is profitable again. Then ask 'em if they really want the bonus.
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7-10-2009 @ 11:53AM
dave said...
I pruchased AIG stock at approx $31 a share after analysts gave the company a clean bill of health. 29 days later the stock was at approx. $2.44 and sinking. I lost $18,000 in my 401k trading account. Not a single investigated into this FRAUD. In the meantime ex CEO Greenberg cashed out an offshore stock account ahead of the collapse to the tune of $4.22 billion ???.
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