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AIG's success will be on own terms, failure on taxpayers'
Egon Donnarumma
Issue date: 3/31/09 Section: Commentary
Recent news of AIG paying out $165 million in bonuses of the nearly $150 billion it has received in federal bailouts has sparked public outrage to the point where the lives of AIG employees have been threatened. State Attorneys General like New York's Andrew Cuomo and Connecticut's Richard Blumenthal have taken the cue from the Senate Finance Committee back in November to look into whether the bonuses issued by failing financial institutions, like AIG, violated state laws. Government at both the federal and state levels has tried to block these bonuses. The trouble is that these bonuses are legal. AIG employees have every right to, and should be compensated fully for their work.
Blumenthal claims that these bonuses do not qualify under Connecticut's labor laws because they are not linked to measurable work. He warns not to be "deceived by AIG's flawed legal bluffs." However, others disagree. Wisconsin's Attorney General J.B. Van Hollen has expressed that while unnecessary expenditures like bonuses may be foolish for any business facing insolvency, "absent specific information indicating a transaction is fraudulent as opposed to foolish, I will not use my office to threaten litigation in an attempt to micromanage Wisconsin's businesses."
The payments in question were contractually agreed to back in early 2008, months before the federal bailout. If there were objections to retention payments being paid for with federal money, why weren't there efforts made to stop them with the initial TARP bailout in September to AIG in the amount of $85 billion? Had there been legal implications to the payments, last fall should have been the time to address them.
The fact is that these bonuses are a necessary part of doing business and managing a company as large as AIG. AIG officials applauded the top recipient of the bonuses, Douglas Poling, for his success in selling off several holdings in infrastructure and energy investments. CEO Edward Liddy defended his employees, stating that thus far they have reduced business risk by cutting outstanding trading positions by 36 percent. Government officials and the public in general have ignored the fact that granting bonuses rewards those who are saving the company. Without them, AIG risks losing their most qualified individuals to more lucrative offers from other, more stable, businesses.
Blumenthal claims that these bonuses do not qualify under Connecticut's labor laws because they are not linked to measurable work. He warns not to be "deceived by AIG's flawed legal bluffs." However, others disagree. Wisconsin's Attorney General J.B. Van Hollen has expressed that while unnecessary expenditures like bonuses may be foolish for any business facing insolvency, "absent specific information indicating a transaction is fraudulent as opposed to foolish, I will not use my office to threaten litigation in an attempt to micromanage Wisconsin's businesses."
The payments in question were contractually agreed to back in early 2008, months before the federal bailout. If there were objections to retention payments being paid for with federal money, why weren't there efforts made to stop them with the initial TARP bailout in September to AIG in the amount of $85 billion? Had there been legal implications to the payments, last fall should have been the time to address them.
The fact is that these bonuses are a necessary part of doing business and managing a company as large as AIG. AIG officials applauded the top recipient of the bonuses, Douglas Poling, for his success in selling off several holdings in infrastructure and energy investments. CEO Edward Liddy defended his employees, stating that thus far they have reduced business risk by cutting outstanding trading positions by 36 percent. Government officials and the public in general have ignored the fact that granting bonuses rewards those who are saving the company. Without them, AIG risks losing their most qualified individuals to more lucrative offers from other, more stable, businesses.
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Lorne
posted 3/31/09 @ 9:23 PM EST
That's why i believe in free market. What we see now, is hybrid of capitalism and socialism. If the wrong steps will not be punished, how it can work? But not some jail threats or similar things we can see now - the possible threat of losing everything, that's the only right solution. (Continued…)
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