Financial Lessons We Can Learn from AIG Executives

By now, almost everyone has probably read of the huge bonuses that AIG recently paid to more than seventy of its executives with money that AIG received from the US government as part of its bailout. If you have not read about it, take a few moments to do so. Although there is tremendous outrage being voiced in the media and on the floor of the US congress, I fully support the payment of the bonuses even though the money ultimately came from US taxpayers. Indeed, it would be extreme for AIG to refuse to pay the bonuses because they were contractually guaranteed.

I don’t believe that the congressmen who are calling for AIG to repudiate or renegotiate its agreements with the AIG execu

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15 Responses to Financial Lessons We Can Learn from AIG Executives

  1. Sue says:

    I agree with you David, that even though it was tax payer funded the executives should still recieve their bonuses because it was written into their contract when they were hired.
    I liked this article overall, it’s very true that you should negociate for anything you think is a worthy perk to have.
    One of the greatest lessons I learned was to negociate at job interviews, if they want you as an employee they’ll give you what you want. You’ll come off as someone who cares about the and company they will be working for. And by going through the initial negociation you can learn alot about how much an employer values their employees.

  2. Broken Arrow says:

    Good article!

  3. Tom says:

    Now I’m going to be thinking aobut this all day.

  4. dragonfur says:

    I see this as a double standard. For the automotive bailout, the workers were told they would have to take a huge cut in pay and benefits, regardless of their contracts.
    Yet, the contracts are sacrosanct when it comes to the buffoons who ran the financial pillars on which our economy rests into ruin? The bonuses are to the same guys who CAUSED this meltdown. If there are contracts that should be null and void, it should be these, regarding bonuses, especially! Those so called “retention” bonuses appear to be nothing of the kind, as many who received them were already on their way to bigger and better things outside of AIG.
    The whole thing is a farce, and the American taxypayers are paying for it. The reasoning of this article is fallacious and disingenuous, just as the faux reasons for giving out such bonuses.

  5. Persephone says:

    Great article! I agree with David that the AIG executives shouldn’t give back their bonuses.

  6. manojar says:

    Hmm…
    Bonus = promised to be given when the going would be great. under normal circumstances, when the going is not so great (i.e., they screwed up), then bonuses will not be given, and they would be fired.
    These guys screwed you guys up big time, and you’re supporting them? I find it hard to digest!!

  7. Ann says:

    I finally got an answer to a huge question I’d had about those bonuses when I read the linked article! In the broadcast media, they seem to always fail to mention that at least the majority of those bonuses were retention bonuses. Funny, but I’d be willing to bet that most of those broadcasters have the same sort of arrangement and would have no qualms (and in fact insist) concerning taking such bonuses themselves.

    I’ve benefited from severance packages and stay bonuses and understand what happened much better. I’m also a tad disgusted (once again) with media’s presentation of the whole thing.

    I’m extremely curious about one thing now and hope someone knows the answer. If a company went bankrupt, what would happen regarding retention bonuses? Would the companies be required to pay? Would the bankruptcy court be able to require renegotiation? Not that this applies here, but I am curious! :-)

    No matter what, I’m furious that our congressional idiots are considering setting a precedent regarding heavy taxation of retention bonuses, no matter how they word it! If there is a bankruptcy loophole regarding renegotiation of such bonuses, I could see making bailout funds contingent on bankruptcy laws… come to think of it, maybe that’s what should happen anyway! Not sure.

    Thanks for the clarification! Negotiation is always important when accepting a position.

  8. RAJEEV says:

    I agree with you that in these times we need be very careful before taking up an offer. WE must also:
    1. Know our value in the market place and evaluate the offer vis a vis market offering for similar profile.
    2. Negotiate on both monetary and non monetary aspects.
    3. Maybe check out financial reports and corporate governance issues of the prospective employer.
    4. Negotiate well on severance.
    5. Get unemployment insurance , if no socila security provided by the federal govt.

  9. EEinNJ says:

    It’s entirely reasonable, and should be easy, to simply withhold that bonus money from the next tranche, and let AIG figure out internally how to make up for it. They are supposed to pay it back eventually, anyway- that is, if they don’t go bankrupt.
    As for contract law, well, the Treasury owns 80% of the preferred stock, they can call the shots. People and companies cancel or amend contracts all the time.

  10. Steven says:

    I disagree. If rank and file union members must give back before a union contract is renegotiated, those AIG folks should have to give up their bonuses as well.

    Congress is right to tax them at a 90%

  11. David G. Mitchell says:

    Dragonfur — While I respect your opinion and thank you for sharing it, I do need to clarify the nature of a retention bonus. A retention bonus is generally paid after an employee remains on the job through a stated period. It is VERY common for employees to resign after receiving a retention bonus because they typically have been looking for a new job during the retention period. Accordingly, I cannot agree that the reasoning of the article, or the reasons for giving contractually required bonuses, is either fallacious or disingenuous. Quite to the contrary, actually, as I believe I was both honest and sincere.

  12. Ken says:

    If we did not bail out AIG and the company went into chapter 11 … Would the executives still get bonuses?

  13. As some posts point out, there is a wide discrepancy in how some are treated vs. others.

    This is nothing new in this society. Compare teacher’s salaries with those of plumbers, or almost any other profession.

  14. Beth says:

    Interesting article. I wonder how much the current administration knew of the specific contract details.

  15. spicoli says:

    It is funny that this was such a big deal two weeks ago when it happened. Now it is all but forgotten. Is it any less of a big deal now? I don’t think so.

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