AIG Bonuses

The big news last week was that failing insurance company AIG, despite receiving $180 billion in bailouts from the government, spent $165 million on employee bonuses, including some of the people who were responsible for AIG imploding.  There was an uproar in the press, and the House passed a 90% penalty tax in an effort to recover the bonus money.

But then it came out that our leadership knew about the bonuses and lad let them stand in earlier bailout legislation.  Moreover, the Constitution prohibits retroactive law.

I’d like to think that a prudent management, in writing contracts for employee bonuses, would include provisions for cancelling the bonus if the employee runs the company into the ground.  But then a prudent management would not have let itself be run into the ground.

In the end, even though it feels good to give in to the populist rage and try to take the bonuses back through one means or another, it’s probably better to let them stand.  We’re supposed to be a nation of laws and not of mob rule.  Moreover, some of the employees receiving bonuses might actually deserve them.

The bigger questions  are:

  • Why did AIG management, over the years, applaud the very measures that led to their destruction?  The short answer is, ‘they turned a profit.’
  • Why did the government so readily hand over billions to bail out AIG?  The short answer is, ‘AIG was, and is, too big to fail.’
  • Why did nobody care to look beyond the short answers?

Leave a Reply