Argument: Bonuses help AIG keep employees and survive

Issue Report: AIG bonuses


“What has AIG done wrong?”. March 19, 2009 – 2.) As mentioned in a previous blog entry, CEO’s and other higher ups in companies are generally compensated for their worth. If a CEO, such as the one at AIG, makes millions of dollars in bonuses, that indicates that the bonuses are tied to a nonverbal promise that he will stay with the company. Bonuses are the business world’s way of keeping those who do the things necessary to keep a company moving forward. Therefore, AIG paid these bonuses to keep those in the decision making positions from leaving and occupying relative positions at other firms. AIG prefers to keep those who know the company well, so that the rebuilding can be quicker, smoother and more efficient. If that is not the ultimate goal, then the government should be taking care of the whole deal, because they are incredibly good at being slower, rougher and unbelievably inefficient. AIG knows what it has to do to get on the right track, but the ideal situation is one where executives dont have to be retrained, where fixes dont have to be sought from outside the company and where markets can create an easier way out of the situation.

Andrew Ross Sorkin. “The Case for Paying Out Bonuses at A.I.G.”. New York Times. March 16, 2009 – A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it. […] A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave — the buzz on Wall Street is that some have, and more are ready to — they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it.

Ruth Marcus. “Ruth Marcus: The case for AIG bonuses”. Washington Post. March 18, 2009 – In the short run, hammering the AIG employees to give back their bonuses risks costing the government more than honoring the contracts would. The worst malefactors at AIG are gone. The new top management isn’t taking bonuses. Those in the bonus pool are making sums that for most of us would be astronomical but are significantly less than what they used to make. Driving away the very people who understand how to fix this complicated mess may make everyone else feel better, but it isn’t particularly cost-effective.