Monday, March 16, 2009
AIG
The fact that AIG decided to use $165M of government bailout money to pay bonuses is infuriating. Now, those who know me might be surprised to hear me say this. But there are a couple of things at play. There should not have been a government bailout in the first place. We would not even be dealing with this question. But given that there was a bailout, and that we did pay for it, a properly managed company should have stopped paying bonuses long before it needed a government bailout. AIG says that they are contractually obligated to pay these bonuses. Well, someone didn't do their job and wrote a lousy contract. Any contract worth the paper it's written on ought to have a clause that says if business is in the toilet, bonuses go out the window, end of story. I guess it's the whole bubble thing -- if they tried to write it into the contract, the people getting the bonuses would have hightailed down the road to BJH or some such. And who is paying for this nonsense now? We are. Which brings me back to my first point -- there shouldn't have been a bailout in the first place.
Subscribe to:
Post Comments (Atom)
4 comments:
It's happening everywhere -- my old company just paid its president $1.4 million to leave after being there for just three years. The stock went from around $25 to $2.30.
I'd love to believe we live in a system that rewards merit, but...
I don't doubt that it's happening everywhere. The only reason AIG is in the news and not your company is the amount of money they got from the government.
Merit?!.. Surely you jest. What our system rewards is financial shenanigans. At that stratospheric level, at least. At my level, I'd like to think it still rewards merit to some degree, though if things continue as they are, it's going to be more along the lines of "Here's a Starbucks card for your hard work and expert knowledge. Go get yourself a latte."
I'm bothered by the bonuses too, but I'm bothered more by our failure to break up these companies. As far as I can tell, its not even in the national discourse.
If we are going to save companies that are too big to fail, then doesn't it make sense to immediately make them smaller? It seems pretty obvious to me: if you are too big to fail, then you are too big to exist.
Good point, Mike. I am deeply uncomfortable with breaking a company up by force. If something is too big to exist, it ought to fail on its own for that very reason. Maybe some pieces that fall off can find a way to be successful. But "too big to fail" implies that the repercussions of allowing that to happen are just too catastrophic, and if that's really true, then I don't know what the answer is.
Post a Comment