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AIG – One more thing…

By Brian | March 18, 2009 | Share on Facebook

It’s being reported today that seventy-three of the roughly four hundred AIG employees that received retention bonuses received bonuses of more than $1 million. It’s also being reported that eleven of them (including one who received $4.6 million) have already left AIG, and received the bonus anyway.

In my previous post, I attempted to explain that retention bonuses are not new, nor are they sinister plots to distribute taxpayer money to rich executives. Especially when a company is going through tough times, retention bonuses can be absolutely critical to retaining the most critical people so that the company can flourish again when the crisis is over. I roundly criticized our leaders (including the President) for misleading the American people into believing that this wasn’t the case.

I stand by that criticism. However, if AIG’s retention contracts were written such that bonuses (especially substantial ones) are still paid even after an employee leaves, then we’re talking about extremely poorly written contracts.  Also, if you believe that almost 20% of your division’s staff requires $1 million to remain with the firm, then you haven’t done nearly enough to incent them in other ways.

UPDATE:  Yes, I know – an update to an update, but these things evolve rather quickly.  Anyway, it was pointed out to me by those who know better that the eleven people who left probably stayed until the day they were required to stay to get their retention bonuses, and then left for the job they had lined up as “retention day” neared.  Payout of the bonus itself could we weeks or months later, which would create the situation described above – a person who’s already left the company receiving a retention bonus.  If that’s the case, then the retention bonus did exactly what it was supposed to do – keep the employee in the firm until a predetermined date.  The bit about 20% of the staff receiving $1 million or more for retention is still a valid criticism, though…

Previous statements made on this matter by our leaders and by the media leave me with little confidence that we’re getting all the facts straight, but if the above is true, I say that AIG fire those responsible for creating these contracts. Not because AIG has received government bailout funds, or because it feels good to punish rich people when times are bad, but because they did a lousy job structuring their retention contracts. Even in a good market, the above terms do the company no good and don’t achieve the retention incentive that they set out to achieve in the first place.

By the way, while I have your attention (if I still have it…), I’d also like to emphasize two things from my previous post that I fear weren’t clear enough:

Topics: Money Talk, News and/or Media, Political Rantings | 1 Comment »

One Response to “AIG – One more thing…”

  1. FamilyGreenberg.Com - What Happened? The AIG Bonus Kerfuffle says at March 18th, 2009 at 5:05 pm :
    [...] AIG – One more thing… [...]


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