Update: AIG to Give Bonuses and the Resulting Political Theatre

by Deb Cupples |  As an AIG shareholder (albeit a tiny one), I'm not happy about this news.  Every shareholder dollar funneled to an executive is one less dollar for the company to use paying off debts, offsetting losses, or funding company growth.  We need legal limits on the amount of shareholder money that public company execs can funnel to themselves (no, I'm not talking about privately held corporations).

Anyway, The New York Times reports:

"The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.

"Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

"The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Mr. Geithner last week pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the rest to performance." (NYT)

Mr. Geithner demanded that the bonuses be "renegotiated"?  How about cut to $0? Period.  Americans nationwide are losing jobs and houses and the ability to feed their families.

Anyone who still has a job at AIG should be floor-kissing grateful to be getting a decent salary at all.  The same could be said of the folks working our nation's other huge companies that would not be operating today if not for taxpayer-funded bailouts.

The folks running AIG (and other bailed-out companies) should show gratitude by helping reduce our nation's frighteningly fast-growing unemployment rate -- 651,000 American jobs were lost in February, alone. 

If a new employee would cost AIG $100,000 (likely a high estimate), then AIG could create 1,650 new jobs simply by giving $0 in bonuses this year and instead using the $165 million in proposed bonus money to fund new jobs.  AIG could create 825 jobs if AIG's Board merely cut the proposed bonuses in half (to $82.5 million).

No, that wouldn't solve our nation's unemployment crisis, but it would be a good-faith contribution.

Yves at Naked Capitalism does a good job of explaining, in detail, why Mr. Geithner's public response to news of AIG executives' proposed looting of the shareholder money pot is little more than political theater.

Incidentally, AIG's Board has been allowing executives to loot the shareholder money pot for a while now.

In 2007's final quarter, for example, AIG had  $5 billion in losses.  This should have completely precluded bonuses for senior partners.  But ex-CEO Martin Sullivan persuaded the Board to give bonuses anyway: Mr. Sullivan got about $5 million in cash.  I don't know what the other 69 (or so) senior execs got.

After Mr. Sullivan resigned in June 2008, AIG Board members voted to give him a $15-million parting gift (platinum parachute) -- yes, the same Mr. Sullivan who'd presided over AIG's massive meltdown.

AIG exec Joseph Cassano was in charge of the financial products division when it imploded and caused AIG to nosedive.  In 2008, Mr. Cassano was, understandably, asked to resign.  AIG's Board allowed Mr. Cassano to keep  $30+ million in unvested bonuses AND kept him on a million-dollar-a-month retainer. 

It's not as though Mr. Cassano would have starved without those gifts: from 2001-2008, he got $280 million in compensation, courtesy of AIG's shareholders.

UPDATE

The Wall Street Journal says the total of AIG's bonus plans is around $450 million.  Again, if non-managerial employees cost AIG $100,000 a year, the company could use that bonus money to create (or maintain) 4,500 jobs -- which would be nice for our (generous) nation's economy.

Memeorandum has commentary.

Other Buck Naked Politics Posts:

* Real Bonuses Based on Fake Profits

* Amazing Feat: Execs Made Millions While Driving Companies into Ditch

* Stewart v. Cramer: Jon Sums up Scams & CNBC, Jim Plays Meek

* Report: How Lobbyists & Politicians Caused Financial Meltdown

* Politicians Still dancing for Banks: Citigroup's Repeated Rescues

* Taxes: Media Manipulate People To Speak Against Their Own Interests

* ABC News: Treasury Official Helped Bank Commit Fraud?

* Media Fails to Cover Economists Who Want Bigger Stimulus Package

Comments

[Thingumbob]

If we as a nation are so crazy as to forgo bonuses for AIG employees whoever can we possibly get with the requisite expertise to take their place now that Bernard Madoff is going to jail? Maybe he could get a work release. (Alas.)

[rawdawgbuffalo]

now who9 are the real gangsters

[Deb]

Hi RawDawg!

How are you? Obviously, we agree on the gangster issue.

[Alexandra Cannon]

Why would our President fork over these bailout dollars without creating stipulations that would prevent this sort of waste? That should have happened as a condition of receiving our tax dollars.

[flowerplough]

There’s Bammy's congressionally-stalled bankruptcy-judge cram-down plan, which would allow the courts to renegotiate interest rates and loan principal and abrogate private contracts. And then there's Bammy's boy Summers, who's saying that “you can’t govern out of anger” and that the government doesn’t have the power to stop AIG bonuses from being paid out under existing contracts...

Whatta buncha bumbling Pashington wussies. Maybe the Bard's Butcher Dick was onto something. Ain't likely I'd call 911 if I saw some nut getting all postal inside AIG's headquarters.

[flowerplough]

Or inside a large government office building down in D.C.

[VinceP1974]

This is obscene. The Dept of Treasury is severely under-staffed (on purpose?) and they're going to waste their time on bonuses for employees?

What sort of obscene pettiness is this?

Are they trying to deprive NYC and NY State of income taxes? Are these bonuses not stimuulus?

These idiots running Congress and the White House are simply out to crush everyone.

These are dangerous times..we have a Govt at war with its own citizens.

[Del Patterson]

I have been following you for a while now. I finally got you on my list (ok, I admit that I am new at this).
I wrote about this same topic today. Perhaps you could review and respond.
Thanks

[Deb]

HI Alexandra,

I agree.

I posted about that repeatedly during the Fall, when President Bush was pushing for the first bailout bill and Congress was going along with it.

[Deb]

HI Flower,

Have you actually seen the AIG bonus contracts? If so, please tell me where to find them.

I'd love to get my hands on them but am not sure how to.