Those Pesky AIG Bonuses

Unlike apparently pretty much the whole country, I have really mixed feelings about the $165 million in bonuses recently paid to AIG executives. I totally understand the outrage given that over $100 billion of your tax dollars have gone to save this “too big to fail” giant. And the fact that 11 people that have left the company got over $1 million each. No matter that this is less than 1/10 of 1% of the money we gave them.

But here’s the thing. They had contracts. The company was legally obligated to do this. Could/should they have tried to renegotiate? With what leverage? Refuse to pay and force the employees to sue? I have worked with labor and employment lawyers, it is a really not good thing when an employer is taken to court over failing to pay compensation. Threaten to fire them? Again, I’m pretty sure that has labor law connotations, plus a bunch of them left anyway, so not sure that would have helped. About the only thing that might have permitted a change would be bankruptcy court, but even then employee compensation is usually one of the last things the bankruptcy court looks to change.

The President is angry at this “outrage” I think, in part, because his own Administration knew about it for a number of weeks, could have intervened before the payments were made, and did not. So he is trying “every legal avenue” to get the money back. There is even a bill going through Congress to tax the bonuses 100%! Of course this probably wouldn’t work on the many foreign people who received these bonuses.

I don’t think bankruptcy for some of these big companies necessarily means failing. It means reorganizing. Yesterday GM President Wagoner said that GM would liquidate if it filed for bankruptcy. It is not clear at all to me why this would have to be true. I think it may be time to cut our losses with AIG and let it play out without further bailout money.

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