Have you heard about the bonuses paid to the losers at AIG? OK, that’s a joke because everyone has heard about how “the very employees responsible for running the company into the ground” are making off with millions in tax payer dollars as Senator Mark Warner wrote in a letter to the AIG CEO Edward Liddy. Now I will never receive a seven figure bonus and I can’t figure out why a company would ever agree to pay one, but with that being said, I’m just not on the Bonus Bashing bandwagon yet. It’s not that I think AIG is great. It’s not that I’m especially sympathetic with the downward spiral that the formally high riding AIG folks are on. The real reason that I can’t yet bring myself to go looking for my torch and pitchfork is that we really don’t know squat about these bonuses… and neither do the congressmen building ever higher soap boxes from which to denounce them. What we don’t know so far: who got the bonuses, why they got them, what were the criteria for receiving them. What we do know: $165 million in bounuses were paid and a total of close to $1 billion is slated to be paid to around 4,600 top managers in 2009. So do all our congressmen know what they are talking about?
I heard one congressman saying something to the effect of “how do any of these people deserve performance bonuses when their company is crashing?” Let me say again that I don’t understand million dollar bonuses, but that said, I think it is perfectly reasonable that bad companies can have great employees. Should the top salesman at the local GM dealership give up his bonus because GM is doing poorly? What if GM accepts government money? What if he sells a crappy car? My thought is that if he was working to an incentive plan and he achieved his end of the deal, he should get his check. Many employees receive some portion on their pay as variable compensation. Every employee at the company where I work is on a bonus plan. We don’t get millions, but everyone has the potential to get up to 10% of their annual pay based on performance. For more senior employees the percentage is higher. If I meet my objectives and targets, can the government take that money away? Personally, I don’t consider this a “bonus”, I consider it pay. How about that guy, Douglas Poling, who received the biggest bonus: $6.4 million? Turns out he was reponsible for trying to clean up the mess and his work resulted in AIG recouping big dollars, dollars that we taxpayers don’t have to pay.
Gerry Pasciucco, a former vice chairman of Morgan Stanley who was brought in by Mr. Liddy in November to wind down the financial products unit, said Mr. Poling had sold off roughly 80 percent of the unit’s assets. Mr. Pasciucco said the money from the sales would go to the government, which has handed more than $170 billion in bailout money to A.I.G. in the last six months.
“He’s done an outstanding job in winding down his investment books,” Mr. Pasciucco said. “He did it at the right time, and we’ve made money. We would be losing money today if we waited to sell some of these assets.”
By the way, our boy Doug gave the bonus back.
We’ve also read about “retention bonuses paid to people who have left the company.” How does that make sense? OK, from far away, I can question the wisdom of offering these plans, but let’s understand that these payments are made after the service term to employees that stayed last year. For whatever reason, AIG offered to make a payment to employees who stayed in 2008. When that period expired, they were entitled to the payment even if they left the company. AIG was not government supported at the time, but was feeling heat. Maybe they felt they needed to keep top performers. I don’t know why they made these offers. You don’t either. I probably wouldn’t have offered such plans, but if I was offered one and accepted it in good faith to stay on a sinking ship, I’d consider my end of the deal complete. Was management pulling a fast one? Let’s go find out, but at least let’s hold our fire until we know the answer.
What has all the rhetoric achieved so far? We’ve got dubious legislation attacking people’s pay passing in Congress without debate, security memos at AIG warning employees to beware of people seeking to do them harm and employees being harassed and attacked at their homes. Does anyone besides me think we need to get the full story before burning people at the stake?