The insurance company, which is largely owned by the U.S. government, is asking the Administration whether it should pay $235 million that it agreed to give to workers in its financial services division. Most of the bonus agreements were set up to retain employees.
According to The Wall Street Journal, AIG has gone to the government to seek "an agreement that lets employees keep enough of the promised bonuses to serve as an effective incentive, but reduces the payments by enough to make them more palatable to the public."
But the bonus issue should not turn on whether the payments are "palatable"; it should turn on whether the employees are essential to AIG's future and whether promises to give the bonuses were made in good faith. AIG's financial success is a financial success for taxpayers. Its failure would cost taxpayers as much as tens of billions of dollars. Bonuses of $235 million are a small price to pay to people who may be essential to producing future earnings.
The government has gotten into the bad habit of labeling all executive bonuses as bad for taxpayers and bad for PR. When essential managers walk out the doors at AIG that approach will be proved a failure.
Douglas A. McIntyre is an editor at 24/7 Wall St.
