AIG to Geithner: drop dead.
It’s true. Against the advice of Tim Geithner, AIG will pay out roughly half a billion in bonuses to the 370 people who bankrupted the company. In a letter to Secretary Geithner, AIG CEO Liddy claims that when it comes to these bonuses, “AIG’s hands are tied.” Liddy trots out the same pathetic excuses: we promised bonuses to these people and we can’t afford to lose their talent. Bringing down a company the size of AIG is pretty impressive. Hate to see those gifted workers walk.
More fuel for your rage inferno from Hilzoy:
If the people in the AIG Financial Products felt this way, they could have made all these legal issues about contracts vanish by simply declining their bonuses. And they could solve the retention problem by agreeing to stay around as long as they’re needed, at their existing salaries. Instead, they are using our predicament to extract even more money for themselves. And that’s obscene.
And Robert Reich asks: are these people accountable to anyone?
Grant,
Driving back to Boston from New York, I just heard the Times’ Gretchen Morgenson on “Fresh Air” with Terry Gross. (My gal Gretchen is as good as my man Joe Nocera!).
Great questions by Gross and clear, helpful answers by Morgenson on AIG. If you can post a link to the program , I’m sure it would be appreciated.
Going beyond the immediate situation, Gretchen had some harsh words for the Administration regarding its handling of the financial crisis: “reneging on transparency;” “no indication of an exit strategy.”
Just pull $165 mm back from AIG and tell them that the bonuses come out of their hides. If that pulls them under (which I doubt) then my father’s words will have been proven true: “life’s a b**ch.”
Reich seems to be unintentionally mounting a good argument for Chapter 11 bankruptcy.
Two suggestions:
a) nationalize AIG immediately;
b) force them into chapter 11 – they do not go away; they just have to work harder.
While we try to get back the AIG bonuses perhaps we could ask the President to retrieve the $7.7 Billion from the 8,000 earmarks that were included in the stimulus bill he just signed.
Over at National Review they posted a link to an article by WFB from 2005 about executive bonuses at companies that perform poorly. Back then the issue was Viacom. I know AIG is a different circumstance, considering the infusion of taxpayer money. But the issue is essentially the same. Why are investors supposed to reward failure?
http://www.nationalreview.com/buckley/wfb200504200907.asp
I’dl like to second Adeodatus’s question: Why are investors supposed to reward failure?
What is the rationale behind bonuses? why are they given (apparently) whether you perform well or thoroughly mess up? How badly do you have to mess up to see your bonus withheld? Mr. Liddy at AIG seems to think he’s legally obligated to pay the company’s bonuses, and if I understood him right, he says they’re paid for work done, regardless of the results.
Have bonuses always been with us? Or are they relatively new, going back only to the Clinton or Reagan or Nixon or Johnson years? Or were they already going strong when Wall Street laid an egg in October, 1929? Maybe someone more acquainted with the ways of the financial world explain this.
Perhaps some of you saw
http://dealbook.blogs.nytimes.com/2009/03/16/if-bernie-met-dante/?scp=1&sq=malebolge&st=cse
“If Bernie met Dante,” imagining what happens when the Poet runs across Madoff in (most likely) the ice of the Ninth Circle (treason) or, at the very least, in the eighth circle, the level of Malebolge set aside for the sin of fraud.
Could the frauds of AIG expect anything better?
Here in Vermont, the president of our local university (a Henry James scholar, I believe) is in hot water with the faculty because he has apparently been paying bonuses to some of his top administrators (mere peanuts, of course, compared to the sins of Wall Street). How common are academic bonuses? I never heard of them, and never, in my long academic career, was I ever offered one (even though I too was a high level administrator.
The bonuses should be paid in AIG stock, which was up 66% today! (It closed at $0.83.)
“The bonuses should be paid in AIG stock, which was up 66% today! (It closed at $0.83.)”
The technical term for this is “dead cat bounce”.
“What is the rationale behind bonuses? why are they given (apparently) whether you perform well or thoroughly mess up?”
You can probably chalk this up to the general erosion of meaning, especially in business (as especially American business) where words are used to hide things.
You’d think that bonus meant what it meant to your father. It was a reward attached to specific criteria for extra performance. Nowadays it’s not much more than a means to make an arbitrary additional payment to people. (I am not talking about wage workers here.) The head of AIG is talking about these bonuses as “contractual obligations” with the strong implication that they were part of a hiring contract and were not linked to performance. This sort of thing is actually rather common. You’d think that this should just be part of the base salary. But although they get bonuses for not doing much, the FACT that they get a “bonus” is the important thing, because it sort of beatifies them as People Who Get Large Bonuses. It’s a kind of anointing that is hard for people outside to understand. Yes, it’s also about money, but a loss of bonus, even when one’s personal efforts led to the collapse of global capitalism, will mean that one is no long a Person Who Gets Large Bonuses. One is finished.
We get a tasty little clue here about the global collapse in general. The group of people that caused these banks to fail was rather small and inbred. The $750 billion dollar question for many has been “if all these people were so smart, why were they making such risky bets?” The answer is that people in this circle couldn’t believe that the other people in the circle were making stupid decisions, even when the decisions did, in fact, look stupid.
Give them their bonuses in ShamWows. I hear they’re worth like $50, but you only have to pay about $10 (if you act now). And you get an extra set for free, so for every $10 we spend we could give them around $100 worth of ShamWow. They should be familiar with this sort of valuation.
This could have been written by Flip Wilson’s Geraldine: the debbil made me do it!
http://rev-ed.blogspot.com/2005/04/flip-wilson-theology-devil-made-me-do.html
Give them their bonuses in stock grants, not options. Options are awarded gratis after a vesting period. The reward is in the long term capital gain upon sale over the price at which they were granted (the “strike” price).
Grants have to the paid for at the time of exercise. Then we’ll see how enamored they are with their company that thinks they are the best and the brightest!
“You’d think that bonus meant what it meant to your father. It was a reward attached to specific criteria for extra performance. Nowadays it’s not much more than a means to make an arbitrary additional payment to people. (I am not talking about wage workers here.) The head of AIG is talking about these bonuses as “contractual obligations” with the strong implication that they were part of a hiring contract and were not linked to performance. ”
Right. These AIG bonuses are billed as “retention bonuses”, not performance bonuses. As you say, a “retention bonus” is a bonus earned in order to continue working for the company. I wish someone would bribe me millions of dollars to continue showing up every day!
Joe Pettit –
Does Scripture say that *all* that is required is that two or three be gathered in HIs name? Don’t Jesus’ words “Do this in memory of me” also have a lot to do with what needs to happen for there to be a Eicharistic celebration?
About the use of translations of the Aramaic — There is a Middle Eastern Roman Catholic rite that doesn’t use any words at all for the Consecration, and the CCD rather recently approved of that form. As I remember, the decision was based on the notion that a certain physical attitude was enough to express the priest’s intention. This implies that words are not at all essential, which seems to me to be a far cry from the magic-like incantations of the other forms of tne Consecration
..
Apparently it is the traditional gesture plus intention and meaning of the gesture that is effective. I can’t see how this is consistent with the recent decision qbout the new translation of the Greek words, but I’ve learned not to expect consistency from the CCD.