Insurance Giant AIG To Pay $165 Million In Bonuses

[Angio333]

Iknow that the government initially gave them OUR money with no strings attached, but this is ridiculous.

*********************************
Insurance Giant AIG To Pay $165 Million In Bonuses

March 14th, 2009

WASHINGTON — American International Group is giving its executives tens of millions of dollars in new bonuses even though it received a taxpayer bailout of more than $170 billion dollars.

AIG is paying out the executive bonuses to meet a Sunday deadline, but the troubled insurance giant has agreed to administration requests to restrain future payments.

The Treasury Department determined that the government did not have the legal authority to block the current payments by the company. AIG declared earlier this month that it had suffered a loss of $61.7 billion for the fourth quarter of last year, the largest corporate loss in history.

Treasury Secretary Timothy Geithner has asked that the company scale back future bonus payments where legally possible, an administration official said Saturday.

This official, who spoke on condition of anonymity because of the sensitivity of the issue, said that Geithner had called AIG Chairman Edward Liddy on Wednesday to demand that Liddy renegotiate AIG's current bonus structure.

Geithner termed the current bonus structure unacceptable in view of the billions of dollars of taxpayer support the company is receiving, this official said.

The entire article:
Insurance giant AIG to pay $165 million in bonuses - Business – cleveland.com

[kork13]

I sort of have 2 opposing views on this.... First off, I believe bonuses should be a company's means of profit-sharing with its employees, as a "thanks for doing a good job" sort of deal. Clearly, AIG hasn't exactly been too profitable of late, so it seems unreasonable that bonuses should be handed out, much less with money loaned to the company from the taxpayer.

At the same time, I expect that there are some sort of contract guarantees for some of these people, and it would be even more expensive (in legal/settlement fees from suits) to deny all bonuses. Also, if AIG betrays its employees, it will lose its current employees to other companies and not be able to hire replacements, and the entire idea of the bailout will have failed anyway, because the company would go under from a lack of qualified employees.

Honestly, this is all a two-edged sword, and nobody wins when the gov't decides to nose-in so dramatically on private business. Necessary sometimes? perhaps. But will the results make everyone (or anyone?) happy? Probably not.

[Angio333]

I think that the execs should be asked to give up the bonuses to save jobs just like many hourly emplyees give up hours or take a pay cut to save jobs.

[Aleta]

How can you possibly pay bonus's to those that ran the business in the ground? They are surviving today because the Government bailed them out. OR should I say not surviving because they need more money.

There are people that have been downsized in their jobs, pay cuts, not continuing to match 401K's, and work days being shortened. These companies are not receiving bail outs.

I think that the fact that the government is bailing them out cancels any contract that they have. You can 't pay people when your company is broke.

[sweeps]

Declaring bankruptcy might have given them the right to cancel bonus contracts -- unfortunately getting bailed out from the government didn't.

My question is about bonus contracts. Is it really a bonus if the company is obligated to give it to you? I wish my bonuses were guaranteed.

[Angio333]

If it is guaranteed, is it really a bonus? wouldn't that just make it part of your salary?

[sweeps]

Angio, can you please edit your original post and replace all the text with a link to the story? There are copyright issues in posting the entire text.

[GREENBACK]

Originally Posted by Angio333

I think that the execs should be asked to give up the bonuses to save jobs just like many hourly emplyees give up hours or take a pay cut to save jobs.

The Execs always take care of themselves first and are the last to go with the most when the buisness fails, then wonder why their employees resent them. Go figure. You aren't the only wondering why these execs haven't stepped up to turn down at least a portion of these bonuses. It would be a good PR move at the least I believe.

[EEinNJ]

I heard the former head of Citi, Sandy Weil, use the same BS argument about paying bonuses- that some poor (Not) bank employee would decide he had to leave and go work for a foreign bank because he had a family to support, and if that happened they couldn't get qualified people....
It seems to me they could replace the whole lot with college interns, supervising chimps, and get better results. Then the bonuses could be in beer and bananas.
Seriously, the Federal government essentially owns these entities- why don't they do an Amendment to Your Credit Agreement like the CC companies get away with. Change the terms, and if they don't agree, pay back the money!

[red92s]

. . . because without their "retention payments", there would be a line of companies waiting to hire these guys, riiiiiiight? Are other financial firms really chomping at the bit to poach the guys from the "Financial Products" division, a division that is nearly single-handedly responsible for the largest quarterly loss in history. These guys are honestly in high demand?!

[red92s]

Originally Posted by EEinNJ

Seriously, the Federal government essentially owns these entities- why don't they do an Amendment to Your Credit Agreement like the CC companies get away with. Change the terms, and if they don't agree, pay back the money!

This. This right here. Needs to happen.

[Angio333]

This is just another reason why we shouldn't have bailed them out in the first place.

[Aleta]

We could have bailed them out but they would have been charged interest the same way they do to the tax payers.

[kork13]

Honestly, I think what's most important in this entire situation is that AIG remain stable enough for a long enough period to spin off its subjugate parts and repay the government. Remember that they were loans, which by the way are accruing interest. That's how it was originally formulated--to provide a potential upside to the USG for preserving the company. Whatever AIG does, I really don't care so long as it pays back the money they got, and does so without causing any further calamities for the economy.

This huge fuss about bonuses is ridiculous IMO--it's simply a blind for the politicians, enabling them to say they are effecting results by stopping these "outrageous" bonuses... umm... yea, great, thanks, D.C. -- you're flipping out about .1% of the $170 BILLION that you gave them. Instead of wasting political capital on such a (relatively) meager sum, how about instead pressing AIG to accomplish its spin-off, which was the original condition of the bailout? Stop LITERALLY wasting everyone's time and money.

[simpletron]

personnally, if there is contractual agreement for them to get paid X dollars for them do A, B, and C, and then they do A, B, and C then we should pay them. because there are rules when it comes to contracts, and I wouldn't want the government saying that contract does not count because it said so. it would be pure madness and undermine the legal system. they should try to renegotiate the future/current contracts.

along the lines of kork13, we need to keep this in perspective. it is 165 million, a large amount until you start comparing to other things like the ~170 Billion in AIG bailouts, or the 108+ Billion in bonus the nine largest banks gave out last year, or the probably 10+ billion in bonus they gave out each year before this mess.

I'm not saying I like this happening, but the government has more important things to fix. they are trying to get us to focus on the drop, while there is full bucket.

Originally Posted by Angio333

If it is guaranteed, is it really a bonus? wouldn't that just make it part of your salary?

instead of guaranteed, I think the contracts were written so that the requirements to get paid are very low, and therefore that almost no matter what happens, they'll get the money. also remember that my company could come in tomorow and say my salary is cut in half, but if I had a contract to be paid X dollars, they couldn't do that.

and if you are wondering where the 108+ billion is coming from, go here:
http://oversight.house.gov/documents/20081028142518.pdf

According to recent public filings, these nine banks have spent or reserved $108 billion for employee compensation and bonuses in the first nine months of 2008, nearly the same amount as last year.

[Aleta]

On TV this morning they were saying that the bonus's weren't necessarily for the financial parts of AIG that failed but to the the insurance side where they seem to do well in and the bonuses go to those who performed well. These bonuses are also spread out. It's not like one person receiving 25 million. Some of the bonuses are smaller ones.

It's anyone's call as to the real story because everyone that has a dog in the race is spinning the story in their own favor.

[cptacek]

Originally Posted by sweeps

Declaring bankruptcy might have given them the right to cancel bonus contracts -- unfortunately getting bailed out from the government didn't.

Good point sweeps! With the bailout, we are in kind of an Alice in Wonderland situation where everyone is wondering which laws we should follow (should we honor contracts? If not, which ones can we break with impunity? Which ones have to be upheld, and who decides that?)