Comments on: Comments on AIG Executive Bonus http://www.thickenmywallet.com/blog/wp/2009/03/20/comments-on-aig-executive-bonus/ Everything to do with thickening your wallet by entrepreneur turned President of an Investment Company Wed, 08 Sep 2010 16:17:54 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: David Dzidzikashvili http://www.thickenmywallet.com/blog/wp/2009/03/20/comments-on-aig-executive-bonus/comment-page-1/#comment-18551 David Dzidzikashvili Mon, 06 Apr 2009 03:24:00 +0000 http://www.thickenmywallet.com/blog/wp/?p=831#comment-18551 After the government gave AIG bailout money, they should have used ownership rights and cancelled all performance bonuses and laid off the executives who have done nothing but run the company to ground. It is insane how AIG justified their action and rewarded failure. At the end of the day, it's the US taxpayer that is getting screwed left and right. How come nobody is thinking about bailing out the middle class that is losing jobs and homes? After the government gave AIG bailout money, they should have used ownership rights and cancelled all performance bonuses and laid off the executives who have done nothing but run the company to ground. It is insane how AIG justified their action and rewarded failure. At the end of the day, it’s the US taxpayer that is getting screwed left and right. How come nobody is thinking about bailing out the middle class that is losing jobs and homes?

]]> By: Johnny Ancich http://www.thickenmywallet.com/blog/wp/2009/03/20/comments-on-aig-executive-bonus/comment-page-1/#comment-18459 Johnny Ancich Sun, 29 Mar 2009 02:10:12 +0000 http://www.thickenmywallet.com/blog/wp/?p=831#comment-18459 Check out this cartoon about AIG! http://pastexpiry.blogspot.com/2009/03/cartoon-aig-adventures-in-greed.html <a href="http://pastexpiry.blogspot.com/2009/03/cartoon-aig-adventures-in-greed.html" rel="nofollow">*CARTOON*</a> Check out this cartoon about AIG!
http://pastexpiry.blogspot.com/2009/03/cartoon-aig-adventures-in-greed.html
*CARTOON*

]]> By: Riscario Insider http://www.thickenmywallet.com/blog/wp/2009/03/20/comments-on-aig-executive-bonus/comment-page-1/#comment-18401 Riscario Insider Tue, 24 Mar 2009 05:25:00 +0000 http://www.thickenmywallet.com/blog/wp/?p=831#comment-18401 So much for concisely summarizing the "issue in a nut-shell" ;) There are clearly different opinions. Without the taxpayer bailout, would any bonuses have been payable? If not, why use taxpayer money to pay bonuses? Marilyn Barnewall has an interesting article: http://www.newswithviews.com/Barnewall/marilyn101.htm Seth Godin has interesting thoughts too: "... if you're owned by shareholders or bailed out by taxpayers, wasting trillions of dollars because you don't have the guts to market your jobs properly is silly." (see http://sethgodin.typepad.com/seths_blog/2009/03/the-myth-of-big-salaries-its-all-marketing.html) So much for concisely summarizing the “issue in a nut-shell” ;)

There are clearly different opinions. Without the taxpayer bailout, would any bonuses have been payable? If not, why use taxpayer money to pay bonuses?

Marilyn Barnewall has an interesting article: http://www.newswithviews.com/Barnewall/marilyn101.htm

Seth Godin has interesting thoughts too: “… if you’re owned by shareholders or bailed out by taxpayers, wasting trillions of dollars because you don’t have the guts to market your jobs properly is silly.” (see http://sethgodin.typepad.com/seths_blog/2009/03/the-myth-of-big-salaries-its-all-marketing.html)

]]> By: 45free http://www.thickenmywallet.com/blog/wp/2009/03/20/comments-on-aig-executive-bonus/comment-page-1/#comment-18359 45free Fri, 20 Mar 2009 16:45:53 +0000 http://www.thickenmywallet.com/blog/wp/?p=831#comment-18359 I do not see where in your link 70% of the bonus went to the company. What I see is a payout comparison to hedge funds that is not the same as the company keeping 70% of the bonus. Whether or not the FPG imploded or not, the fact still remains that these were not the decision makers that put AIG on the path to failure and they should be rewarded for sticking around to work it out. These bonuses, as described by Ed Liddy, were for specific and satisfactory performance of certain tasks (i.e. liquidating a portfolio). Once completed, these employees completed their contractual obligations to receive the bonus and were free to go, which is why there were 11 individuals who left. This type of arrangement is not uncommon in business. I have in the past received “stay bonuses” for agreeing to remain on a particular job instead of moving to another within the same company in order to facilitate the completion of a project. There is really no difference between this common business tool and what happened at AIG. Retention/project completion bonuses are very effective tools for ensuring that organizational knowledge remains in a corporation. You can be disgusted with AIG for behaving in a fashion that led to this but these people are trying to do the right thing for the most part and deserve to be rewarded for it. As for your comment about allowing AIG immunity to void clauses of contracts, while I am by no means a constitutional scholar (not even a lawyer for that matter) I suspect that type of arrangement would I suspect be covered by the same constitutional clause expected to be used to challenge the 90% tax which states that congress can not pass laws that impact previous arrangements (obviously the legal guys on CNBC say it with much more authority). And as Ed Liddy argues, AIG is in the business or honoring contracts… I appreciate the differing point of view and understand the frustration of many people but the anger is in my mind mis-directed. Let’s start with congress that failed to regulate the industries appropriately, move on to the CEO’s who used holes in the rules to lever up balance sheets with exotic instruments, move next to the rating agencies who showed absolutely no professionalism in the process and let’s not forget all the end users of the process who borrowed 105% of the value of their house with the expectation that real estate always goes up and then bought a Hummer on their Visa. Plenty of blame to go around here but it all seems to be directed at FI’s in general and people like these AIG employees specifically. I do not see where in your link 70% of the bonus went to the company. What I see is a payout comparison to hedge funds that is not the same as the company keeping 70% of the bonus. Whether or not the FPG imploded or not, the fact still remains that these were not the decision makers that put AIG on the path to failure and they should be rewarded for sticking around to work it out. These bonuses, as described by Ed Liddy, were for specific and satisfactory performance of certain tasks (i.e. liquidating a portfolio). Once completed, these employees completed their contractual obligations to receive the bonus and were free to go, which is why there were 11 individuals who left. This type of arrangement is not uncommon in business. I have in the past received “stay bonuses” for agreeing to remain on a particular job instead of moving to another within the same company in order to facilitate the completion of a project. There is really no difference between this common business tool and what happened at AIG. Retention/project completion bonuses are very effective tools for ensuring that organizational knowledge remains in a corporation. You can be disgusted with AIG for behaving in a fashion that led to this but these people are trying to do the right thing for the most part and deserve to be rewarded for it.

As for your comment about allowing AIG immunity to void clauses of contracts, while I am by no means a constitutional scholar (not even a lawyer for that matter) I suspect that type of arrangement would I suspect be covered by the same constitutional clause expected to be used to challenge the 90% tax which states that congress can not pass laws that impact previous arrangements (obviously the legal guys on CNBC say it with much more authority). And as Ed Liddy argues, AIG is in the business or honoring contracts…

I appreciate the differing point of view and understand the frustration of many people but the anger is in my mind mis-directed. Let’s start with congress that failed to regulate the industries appropriately, move on to the CEO’s who used holes in the rules to lever up balance sheets with exotic instruments, move next to the rating agencies who showed absolutely no professionalism in the process and let’s not forget all the end users of the process who borrowed 105% of the value of their house with the expectation that real estate always goes up and then bought a Hummer on their Visa. Plenty of blame to go around here but it all seems to be directed at FI’s in general and people like these AIG employees specifically.

]]> By: admin http://www.thickenmywallet.com/blog/wp/2009/03/20/comments-on-aig-executive-bonus/comment-page-1/#comment-18357 admin Fri, 20 Mar 2009 15:10:45 +0000 http://www.thickenmywallet.com/blog/wp/?p=831#comment-18357 45free: On principal, I do not disagree that hard working people should be rewarded for their efforts and I do believe there is a lot of grand-standing by Congress to win political points when they could have simply passed a bailout bill indicating that they have to approve of all bonuses above a certain amount (and inserted provisions granting legal immunity to AIG et al to revoke a term of contract). But that presumes compotence by Congress (I agree that there were a lot of idiotic remarks made by Congress). However, I separate the details of the bonuses with the reaction of Congress and the idiots who are threatening the executives with violence. The details of the bonuses are pretty galling: The New York Post reports 70% of the bonus money went to the company and not the employees. The remaining 30% went to the employees of the Financial Products Division which got AIG into this mess. http://dealbook.blogs.nytimes.com/2009/03/18/dissecting-the-aig-bonus-contract/ The bonus contract is in the link. I believe the bonus in question relates to employment from Dec 1, 2007 to Nov. 30, 2008- the period of time when AIG imploded. From what I can tell, there are not even any performance standards for receiving a bonus- it is "guaranteed". The New York AG reports that 11 employees who were paid retention bonuses of over $1 million are no longer with the company (most employment contracts state that bonuses are not payable if you resign or are terminated before the bonus payment date). The Guardian has reported that some of this bonus money is going to non-Americans (which would not typically be an issue but for the fact it is the American taxpayer paying this). Should these bonuses not be clawed back at the very least? I don't have an issue with the back-office people being paid bonuses; they are realy collateral damage to this entire saga (and there is a 2nd bonus period from Dec. 1, 2008 to Nov. 30, 2009 which would recognize their efforts to unwinding the positions). I do have issue with the decision makers who decided to execute the traders. You have to remember that AIG ended up dominating the market for credit default swap insurance so this was not exactly a one person decision given the scale that they went into these types of products. My essential issue is that AIG is basically a crown corporation now. It is 80% owned by the U.S. Government. If the Minister of Finance brought down a terrible budget and then announced the Ministry was paying the bureaucrats a bonus after that announcement, would you not be peeved? Do the AIG employees deserve to be made out to be the sole villians in this drama? Of course not. I do not for a second support how Congress has played this (which, is really a way for them to fuel popularist angry and divert attention away from the fact they mismanaged the bailout bill so badly). This has been managed extremely poorly but both AIG and Congress. But, stripped of the rhetoric, do I fundementally believe the Financial Products Division deserve this bonus based on the first bonus period stated in their contracts? No. Thanks for your comment. Rant away any time. 45free: On principal, I do not disagree that hard working people should be rewarded for their efforts and I do believe there is a lot of grand-standing by Congress to win political points when they could have simply passed a bailout bill indicating that they have to approve of all bonuses above a certain amount (and inserted provisions granting legal immunity to AIG et al to revoke a term of contract). But that presumes compotence by Congress (I agree that there were a lot of idiotic remarks made by Congress).

However, I separate the details of the bonuses with the reaction of Congress and the idiots who are threatening the executives with violence.

The details of the bonuses are pretty galling:

The New York Post reports 70% of the bonus money went to the company and not the employees. The remaining 30% went to the employees of the Financial Products Division which got AIG into this mess.

http://dealbook.blogs.nytimes.com/2009/03/18/dissecting-the-aig-bonus-contract/

The bonus contract is in the link. I believe the bonus in question relates to employment from Dec 1, 2007 to Nov. 30, 2008- the period of time when AIG imploded. From what I can tell, there are not even any performance standards for receiving a bonus- it is “guaranteed”.

The New York AG reports that 11 employees who were paid retention bonuses of over $1 million are no longer with the company (most employment contracts state that bonuses are not payable if you resign or are terminated before the bonus payment date). The Guardian has reported that some of this bonus money is going to non-Americans (which would not typically be an issue but for the fact it is the American taxpayer paying this). Should these bonuses not be clawed back at the very least?

I don’t have an issue with the back-office people being paid bonuses; they are realy collateral damage to this entire saga (and there is a 2nd bonus period from Dec. 1, 2008 to Nov. 30, 2009 which would recognize their efforts to unwinding the positions). I do have issue with the decision makers who decided to execute the traders. You have to remember that AIG ended up dominating the market for credit default swap insurance so this was not exactly a one person decision given the scale that they went into these types of products.

My essential issue is that AIG is basically a crown corporation now. It is 80% owned by the U.S. Government. If the Minister of Finance brought down a terrible budget and then announced the Ministry was paying the bureaucrats a bonus after that announcement, would you not be peeved?

Do the AIG employees deserve to be made out to be the sole villians in this drama? Of course not. I do not for a second support how Congress has played this (which, is really a way for them to fuel popularist angry and divert attention away from the fact they mismanaged the bailout bill so badly). This has been managed extremely poorly but both AIG and Congress.

But, stripped of the rhetoric, do I fundementally believe the Financial Products Division deserve this bonus based on the first bonus period stated in their contracts?

No.

Thanks for your comment. Rant away any time.

]]> By: 45free http://www.thickenmywallet.com/blog/wp/2009/03/20/comments-on-aig-executive-bonus/comment-page-1/#comment-18355 45free Fri, 20 Mar 2009 13:03:51 +0000 http://www.thickenmywallet.com/blog/wp/?p=831#comment-18355 From Twitter this morning...Credible ABC Source GStephanopoulos AIG source says that 3 top financial products execs and several other officials resigned yesterday. Fear for safety given reason Is this what hard work is supposed to get you? From Twitter this morning…Credible ABC Source

GStephanopoulos AIG source says that 3 top financial products execs and several other officials resigned yesterday. Fear for safety given reason

Is this what hard work is supposed to get you?

]]> By: 45free http://www.thickenmywallet.com/blog/wp/2009/03/20/comments-on-aig-executive-bonus/comment-page-1/#comment-18354 45free Fri, 20 Mar 2009 12:58:16 +0000 http://www.thickenmywallet.com/blog/wp/?p=831#comment-18354 The vast majority of the people receiving these bonuses were not the people who made the decisions to make the investments. These are traders who implemented the strategies management laid down, accountants who tracked the positions and back office folks who made sure all of this was settled for the right amount and that all payment to and from AIG were made on time. These are people who are smart, hard working and talented individuals, most of whom could have jobs in other industries or companies. They are also the people most familiar with the AIG book of business so the ones most likely to be able to unwind these positions in a manner most likely to be friendly to the taxpayer (meaning paying them back). If these people left, you would have to pay large incentives to get smart people to come and try to figure out how to unwind the book of business. Ask yourself this…would you go to work for AIG right now without a big signing bonus? Not if you are any good and have any other options. The other alternative is you let these people attrite and you hire whoever will come work for AIG without a signing bonus (or a project completion bonus). You may get a few altruistic people who are willing to come and give it a go but the majority of the folks coming will be the castoffs who have no other options. Are these the people you want unwinding some of the most complex financial products ever invested on the taxpayers dime? And what if AIG decided to not pay the bonuses and fire them as one congressman suggested? I suspect the breach of contract and wrongful termination lawsuits would cost the company way more than the bonuses they paid. These are for the most part hard working Americans who have worked harder in the last year than most people do in their lives and deserve everything they received from AIG in the form of a “bonus”. What they do not deserve is the threats against their families, congress painting them out to be the destroyers of America and putting the whole recovery effort in jeopardy, the media (conventional and otherwise) hatred etc. etc. etc. One last thought…Ed Liddy deserves a medal for doing what he is doing for a buck! Sorry for the rant but this kind of thing really gets under my skin. The vast majority of the people receiving these bonuses were not the people who made the decisions to make the investments. These are traders who implemented the strategies management laid down, accountants who tracked the positions and back office folks who made sure all of this was settled for the right amount and that all payment to and from AIG were made on time. These are people who are smart, hard working and talented individuals, most of whom could have jobs in other industries or companies. They are also the people most familiar with the AIG book of business so the ones most likely to be able to unwind these positions in a manner most likely to be friendly to the taxpayer (meaning paying them back). If these people left, you would have to pay large incentives to get smart people to come and try to figure out how to unwind the book of business. Ask yourself this…would you go to work for AIG right now without a big signing bonus? Not if you are any good and have any other options. The other alternative is you let these people attrite and you hire whoever will come work for AIG without a signing bonus (or a project completion bonus). You may get a few altruistic people who are willing to come and give it a go but the majority of the folks coming will be the castoffs who have no other options. Are these the people you want unwinding some of the most complex financial products ever invested on the taxpayers dime?

And what if AIG decided to not pay the bonuses and fire them as one congressman suggested? I suspect the breach of contract and wrongful termination lawsuits would cost the company way more than the bonuses they paid.

These are for the most part hard working Americans who have worked harder in the last year than most people do in their lives and deserve everything they received from AIG in the form of a “bonus”. What they do not deserve is the threats against their families, congress painting them out to be the destroyers of America and putting the whole recovery effort in jeopardy, the media (conventional and otherwise) hatred etc. etc. etc.

One last thought…Ed Liddy deserves a medal for doing what he is doing for a buck!

Sorry for the rant but this kind of thing really gets under my skin.

]]> By: viennatech http://www.thickenmywallet.com/blog/wp/2009/03/20/comments-on-aig-executive-bonus/comment-page-1/#comment-18352 viennatech Fri, 20 Mar 2009 11:22:35 +0000 http://www.thickenmywallet.com/blog/wp/?p=831#comment-18352 Lost marbles? No repercussions? Sounds a lot like the place I work..... Maybe this is the new business mentality, I hope not. Lost marbles? No repercussions? Sounds a lot like the place I work….. Maybe this is the new business mentality, I hope not.

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