Posted by: mutantpoodle | March 16, 2009

Let ’em sue

AIGMany many many people are furious over the news that AIG is paying hundreds of millions in bonuses to employees who work at the financial products unit that – how do I say this nicely – destroyed AIG. Hilzoy:

If you want to get really angry, consider that this division, whose members will be getting nearly half a billion dollars in bonuses for the remainder of 2008 and 2009, has about 370 employees. That’s well over a million dollars a person, to a group that lost over $40 billion (so far!), and bankrupted its parent company. Nice work if you can get it.

Two things. First, I used to get bonuses. Those bonuses were discretionary, and the discretion was based on (a) how the overall company had performed over the period in question, (b) how your division had done in that same period, and (c) how you, personally, had performed in that period.

How does going 0 – for – 3 get you millions of dollars in bonuses? And, if the bonuses were contractual, then they aren’t bonuses. Merriam-Webster:

Bonus (n): something in addition to what is expected or strictly due: as (a) money or an equivalent given in addition to an employee’s usual compensation…

Now, I got a bonus every year I was eligible, but that was during a string of highly successful years for my former employer. I don’t know what would have happened if our multinational communications conglomerate had managed to put the worldwide economy at risk and sucked up over $150 billion of government bailout money, but I’m pretty sure I wouldn’t be getting a little something extra for my troubles.

The hook on which AIG CEO Edward Liddy hangs his decision is that they just HAVE to – it’s the law!

In the first quarter of 2008, prior management took significant retention steps at AIG Financial Products. These arrangements were designed at a time when AIG Financial Products was expected to have a significant, ongoing role at AIG, and guaranteed a minimum level of pay for both 2008 and 2009. (Due to losses at AIG Financial Products, a senior manager will receive about 43% of his 2007 expected level for 2008.) Some of these payments are coming due on March 15, and, quite frankly, AIG’s hands are tied. Outside counsel has advised that these are legal, binding obligations of AIG, and there are serious legal, as well as business, consequences for not paying.

To quote Jon Stewart, Fuck You.

Look – if you agreed to bonuses before a cataclysmic meltdown at your company, and that meltdown was the result of what can best be described as fraud, your legal obligations may not be as clear-cut as you make them out to be. As Firedoglake’s looseheadprop says:

These things are “bonuses” not salary. Words have meaning, even in law. If they are “retention bonuses” you are only contractually required to pay them if you want the executives to be contractually obligated to stay in your employ.

Amen to that.

Second, many years ago, I was responsible, from afar, for the finance department of one of my company’s production entities. The woman who ran the department wasn’t very good (she had been hired before I came aboard) and had about 5 months left on her contract, which was not going to be renewed. One day, she concluded an argument with her one employee (another woman) by calling her a stupid c–t.

Our HR VP called me and told me the story, and asked me what I thought we should do. I told her we should fire her. Right then.

Well, people started worrying about whether she might have a case against us, and whether she’d sue, to which my response was, let her. Let her get up on a stand in a jury trial and explain why her behavior was appropriate.

Much to my chagrin, the cowardly way prevailed, and she stayed on for another 3 months before she was sent packing, paid in full through her contract.

So, Edward Liddy, and Tim Geithner, and Lawrence Summers – the answer is that no one who caused this mess gets bonuses this year. If they don’t like it, they can leave; if they want to sue, let them go right ahead. The popularity of these folks is right up there with Bernie Madoff – except that Madoff hurt people who were his clients, and a circle or two outside of that. AIG has screwed us all.

Oh, and Barack Obama? Now would be the time for some of that bold action you’ve been talking about.

UPDATE: Emptywheel makes a pretty convincing case that AIG is holding a gun to our heads

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s


%d bloggers like this: