Monday, March 16, 2009

Bonus Mania

The AIG bonus story has gotten plenty of press over the last few days - and rightly so. The idea that a company in "need" of billions in tax payer subsidies is also handing out millions in bonuses, justifiably angers taxpayers.

But truthfully it's just too easy to jump on the "bonuses are ridiculous" band wagon at this point. I'd like to look at this from a slightly different, although equally critical, angle. How did AIG executives not understand the public relations nightmare these bonuses would create?

These folks must have been watching the news when the president publicly decried these very kinds of bonuses a few months ago. They must have been paying attention when the million dollar office refurbishing played out in the media. They must understand that it's no longer the high flying 1990's - right?

It looks like the wall street sense of entitlement is even stronger than I imagined. Even looking at this issue strictly from a business perspective, how did AIG executives fail to notice the reputational hit the company would take when word of bonuses leaked out? Did they think it wouldn't leak? (That just seems naive.) Did they assume it would just blow over? (That's just stupid.)

In the end, the decision to hand out millions in bonuses probably points to incompetence at the helm of this company. Since the American taxpayer is handing over her hard earned money to this lot, can we at least put someone in charge who knows what they are doing?


  1. On the toob this morning, the paying out of bonuses was "explained" by saying these were contractual obligations from before the bailout, and that if these bonuses weren't paid, they would be in deep doodly with lawsuit and legals fees which would eventually cost more than just paying out the bonuses.

    What do you think about that?


  2. Yeah - I heard that. It seems to me that every other industry segment has been forced to renegotiate contracts when getting federal money. (See auto workers) Wall street types should be subject to the same rules.

    Beyond which, it's my understanding that many of the people who are getting these bonuses are directly responsible for the mess AIG is in. How could they have possibly earned bonuses for driving their company in to the groun? I would love to see those contracts.

  3. I'm surprised you didn't target another major player responsible for the current mess, given your comment above, Bill. Your comment states, "It seems to me that every other industry segment has been forced to renegotiate contracts when getting federal money." Your statement is true enough. The question, therefore, is why didn't the federal government require AIG and the Wall Street firms/banks receiving bailout money to renegotiate those contracts as a condition of the bailout? That would seem like a responsible thing for the government to do with the taxpayers' money. Yet Congress didn't require that or any other stipulation prior to granting the Treasury Department unlimited authority to dole out $700 billion in any manner it desire. Nor did Congress require any material accountability from the Treasury or the bailout recipients prior to writing that (nearly) blank check.

    I'm not arguing that AIG and those other firms are blameless. They're not. In fact, I think they deserve the current level public backlash that they're receiving, but let's point the finger at ALL of the guilty parties, especially the ones we can actually hold accountable on election day. They are just as culpable as the private firms.

  4. @ Odie - You make an excellent point. that I've tried to make before, the bailout money has been handed out without adequate oversight, and without enough strings attached to protect the taxpayer.

    My point here was more to talk about the sheer idiocy of giving out bonuses with taxpayer money and not thinking that it will come back to bite you.

    I think we agree on this one.

  5. Point taken. On a related front, I came across this article (link below) few days ago. It really connects the dots on how this outrage over bonuses might cause us to miss the real scandal: As part of the AIG bailout, the federal government gave Goldman-Sachs $12.9 BILLION, and Goldman-Sachs publicly stated that they didn't need that money.

    It's kind of like, "Make a little noise with $150 million in undeserved bonuses over here so they miss the $12.9 billion windfall over there." Here's the link: