AIG to Buy Loyalty
By Scott Reeves Dec 05, 2008 1:15 pm
New retention plan to double salaries of selected senior employees.
Nevertheless, you can be sure some members of Congress will yowl about AIG’s (AIG) plan to make large retention payments to key employees. This isn’t AIG’s typical stupidity, which includes spending $440,000 on a retreat at the St. Regis Monarch Beach Resort in Southern California after pocketing an $85 million taxpayer-backed bailout - it’s a smart move.
Some retention payments will double -- or more -- the salaries of selected senior managers, Bloomberg News reports.
Some of the company’s 130 top executives will receive more than $500,000 to stick with AIG through 2009. Lower-paid managers also will receive cash awards to stay with the company, but the number and amount hasn’t been determined.
AIG says it will be sure that taxpayer money isn’t used for bonuses for the top 60 managers. And the others? Does Congress propose that the lower ranks scatter and be replaced with naifs, ninnies and nutcases because they’re cheap?
Most managers will receive the first of 2 installments by the end of December. The retention payments will be in addition to year-end bonuses typically paid in March. AIG disclosed its retention plan in a September filing, but didn’t state the amount most participants would receive. You can bet this will spark charges of “Cover-up!”
The coming flap over AIG’s retention bonuses will underscore the basic problem with federal bailouts and the ongoing split between New York and Washington.
Constitutional authority and competence aside, Congress feels entitled to micro-manage companies receiving Federal money. Those concerns with their hands out should have seen this coming.
Some bright member of Congress is sure to ask: Where exactly are these hotshot AIG executives going in a recession? Most executives would probably have a tough time finding a new job, but Congress doesn’t understand that top management talent is as rare as top sports or entertainment talent. Like sluggers, quarterbacks or box-office draws, attracting and retaining talented managers requires cash on the barrelhead.
That’s competition, a concept Congress has yet to master. The executives in line to receive AIG’s retention bonuses know the company and the industry. Now, all they’ve got to do is perform.
Let’s hope AIG’s top executives are good at what they do, or at least better than what appears to be their clunk-headed public-relations department.
No positions in stocks mentioned.
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Reply
2008-12-05 13:24:58
This letter is for you AIG
J&J seeks Tarp protection
After a 3rd qt review of accumulative losses of virtually all segments of the J&J portfolio the decision was made to seek protection. Following is a list of assets followed by a list of creditors. All numbers in dilutive Dollars
Assets:
Checking account 265.00
Savings Account 485.00
401k as of OCT 3.680.00
Equity in 01 Buick -390.00
Equity in 95 ford PU 800.00
Equity in home -45.000.0
Loose change 14.95
Debts
Buick - 4.500.00
Home -195.000.00
Investment loss -16.000.00
Future Earnings Negative
After a careful reflection it has been decided that Johnny will hitchhike to Washington DC and beg for TARP assistance While Jane Lunchbox jingle mails the keys to their home and seeks affordable housing at the furniture store where Chinese imports come in BIG cardboard boxes.
Alas Johnny is home tarp in hand an 8x8 tarp with reinforced eyelets hand signed by Mr. Paulson and President Bush. Johnny and Jane become part of the Happy Campers society and are promptly lost in Government statistical data base.
This reminds me of a joke I posted last year.
One afternoon, a wealthy lawyer was riding in the back of his limousine when he saw two pathetic-looking men by the side of the road, eating grass. He ordered his driver to stop and got out to investigate. He asked the men, "Why are you eating grass?"
"We don't have no money for food," the first man replied.
"Then you must come with me to my house," insisted the lawyer.
"But, sir, I got a wife and three kids here," said the man.
"Bring them along!" replied the lawyer.
The second man exclaimed, "I got a wife and six kids!"
"Bring them as well!", the lawyer proclaimed as he headed back to his limo.
They all climbed into the car, and once underway, one of the men expresses, "Sir, you are too kind. Thank you for taking all of us with you."
The lawyer replied, "I'm most happy to do it. You'll love my place. The grass is almost a foot tall."
Reflection
Where we are and how we got here.
Lots of foks made mistakes but those at the top make millions because they were suppose to know better. Greed and stupidity makes a potent explosive. So why do we pay millions for this type of management given the track record they have. Billions are paid out in excessive pay packages. Banks, corporate exec, politicians, college deans, sports jocks and hollywood. People making $20.000.00 per hour while the folks that are really busting thier buns get a token wage and pink slips. Time for Change folks.
JPM
2008-12-05 13:26:32
Oh, please
Suppose AIG paid no bonuses. And suppose as a consequence 20% of the bonus eligible left. That's about 25 top managers and maybe 10 times that many lower level folk. Call it 300 people "brightsizing".
Citi, Lehman, Bear Stearns, Wachovia, and WaMu have laid off around 150,000 people between them. If AIG can't find 300 people out of that 150,000 (0.2%) who can fill the shoes of the no-bonus "brightsizers", then the next group of people to be fired ought to be the AIG human resources department.
In the middle of a crushing recession centered on the financial industry, the number of irreplaceable people in the *entire industry* who would leave if not properly compensated is probably less than a dozen. At AIG, the might be one such person. Let them make the case for him or her.
Citi, Lehman, Bear Stearns, Wachovia, and WaMu have laid off around 150,000 people between them. If AIG can't find 300 people out of that 150,000 (0.2%) who can fill the shoes of the no-bonus "brightsizers", then the next group of people to be fired ought to be the AIG human resources department.
In the middle of a crushing recession centered on the financial industry, the number of irreplaceable people in the *entire industry* who would leave if not properly compensated is probably less than a dozen. At AIG, the might be one such person. Let them make the case for him or her.
2008-12-05 13:27:58
AIG retention bonuses
I guess they're worth the big bonuses because they've done such a great job of managing the company.
2008-12-05 13:50:44
Executive Bonuses
I began my career in a large computer networking firm back in the nineties. Back then the same reasoning was used to justify sign on, quarterly, and annual bonus programs for the revolving door of executives, as well as the millions in stock options that they handed each other. The company imploded in 2001, a few of these people are now residing in Federal prisons, with on going civil trials and criminal investigations for some of the others. It seems to me that excessive compensation attracts the wrong sort of talent while repelling those executives of good character and strong ethics.
2008-12-05 14:09:44
Oh, please
Thanks Dean again, for saying this better then I could have. The other irony with retention bonuses is it lays bare the "rats off a sinking ship" behavior of those who, one would think, should have had some loyalty to a company which has enriched them.
The main skill those at the top have (with many exceptions), is getting to the top.
The main skill those at the top have (with many exceptions), is getting to the top.
2008-12-05 14:12:24
Micro management?
I suppose the question that always comes to my mind on the question of executive compensation is not weather the executives are worth their salaries but; how much more they were worth than the next best candidate who did not get the position?
In a free market that spread would not be great. However in the world of CEO's appointing directors who validate executive salaries, all bet are off. What's a hundred million between friends? Plainly, at this level the ability to make the rules dramatically enhances ones ability to win the game.
I have worked in and with executive ranks and have seen ethical lapses, duplicity and all manner of human failings. I am not judging these things, just a witness to them. Leadership is tough but is it necessary to anoint a tough job with a God like compensation package?
This being said your article seems directed to the mid level ranks. Here the question are not just of performance and retention but survival. Salary caps are a fact of life in a shrinking structure. Who stays and who goes will be critical questions as well. I hear no calls from the government (now that they have become the investor of last resort) to make such decisions. In my opinion, that would be a sign of true micro management.
In a free market that spread would not be great. However in the world of CEO's appointing directors who validate executive salaries, all bet are off. What's a hundred million between friends? Plainly, at this level the ability to make the rules dramatically enhances ones ability to win the game.
I have worked in and with executive ranks and have seen ethical lapses, duplicity and all manner of human failings. I am not judging these things, just a witness to them. Leadership is tough but is it necessary to anoint a tough job with a God like compensation package?
This being said your article seems directed to the mid level ranks. Here the question are not just of performance and retention but survival. Salary caps are a fact of life in a shrinking structure. Who stays and who goes will be critical questions as well. I hear no calls from the government (now that they have become the investor of last resort) to make such decisions. In my opinion, that would be a sign of true micro management.
2008-12-05 14:48:37
valuable management
Aren't these the very people that got them into this mess? For that they get a bonus? Maybe we should give them a bonus to LEAVE.
2008-12-05 15:10:44
Oh, please
I can not stand contracted labor. I say down with the UEL, the most vile union of them all!!
UEL - United Executive Loiters.
Why are all executives under labor contracts? Every employer I have worked at specifics from day 1 that only the chief executives may enter into a labor contract with the company.
UEL - United Executive Loiters.
Why are all executives under labor contracts? Every employer I have worked at specifics from day 1 that only the chief executives may enter into a labor contract with the company.
2008-12-05 20:00:54
Oh, please
Point well stated sir! These people are responsible for the mess that AIG is in,...like the UAW union they should be giving back perks just to stay employed! They are already well compensated for the "work" that they have done.
2008-12-05 20:23:18
AIG to buy loyalty
Don't compare management talent to sports or music figures.
First, whatever we feel personally, a Madonna has to sell a million CDs, an A Rod has to sell a million fans. In business, a true entrepreneur has to sell a million customers.
But a CEO only has to seduce a dozen board members. And while we know a bad song or a strikeout right away, it takes years for loans to go bad, or in AIG's case, for "free" default premiums to cause a catastrophic loss.
At the lower levels, the politics may be less of factor as we go down through the ranks, but both politics and chance determine corporate success, far more so than actual business productivity.
First, whatever we feel personally, a Madonna has to sell a million CDs, an A Rod has to sell a million fans. In business, a true entrepreneur has to sell a million customers.
But a CEO only has to seduce a dozen board members. And while we know a bad song or a strikeout right away, it takes years for loans to go bad, or in AIG's case, for "free" default premiums to cause a catastrophic loss.
At the lower levels, the politics may be less of factor as we go down through the ranks, but both politics and chance determine corporate success, far more so than actual business productivity.
2008-12-05 23:09:34
Puleez
Doesn't anybody know when the Minyan staff is putting you on!
2008-12-06 01:28:43
Scott, you are completely wrong
First off: AIG executives are obviously NOT good at what they do. Otherwise they wouldn't be in this mess.
AIG needs to cut the fat (starting at the top).
Begging ppl to stay with packages like this is irresponsible.
I own stock in AIG, and at this point I want them to go under. They don't deserve to be in business.
AIG needs to cut the fat (starting at the top).
Begging ppl to stay with packages like this is irresponsible.
I own stock in AIG, and at this point I want them to go under. They don't deserve to be in business.
2008-12-08 08:32:19
Hush money
Yep let's pay all those players to sit on the sinking ship and keep their lips shut.
Loose lips sink ships.
Loose lips sink ships.
2008-12-08 08:43:41
AIG's talented managers.
Dear Scott,
"...talented managers." Hmmm...
I should think they'd be delighted to stay out of jail.
When I turned on my computer this AM at about 5:45, I found myself reading a story about six figure payoffs to a number of congresspeople, Alphonse D'Amato among them, the point of which was to let Freddie Mac continue its freewheeling ways. (This was around 2005, I think.) Then I left to read some other stuff, & when I came back to Yahoo, there was no sign of the article. I ransacked MarketWatch, Seeking Alpha, & Minyanville. Nothing.
Does anyone out there know anything about that? I'd like to copy the whole thing, not just the excerpt that I sent my son-in-law.
Best, & I wish your friends at AIG luck; if they stick with their talented ways they should be able to skim another couple billion from the rest of us in less time than you can say "Wow look at that market zoom!" (I'm bullish here, which should be good for a day or two.)
SOB.
"...talented managers." Hmmm...
I should think they'd be delighted to stay out of jail.
When I turned on my computer this AM at about 5:45, I found myself reading a story about six figure payoffs to a number of congresspeople, Alphonse D'Amato among them, the point of which was to let Freddie Mac continue its freewheeling ways. (This was around 2005, I think.) Then I left to read some other stuff, & when I came back to Yahoo, there was no sign of the article. I ransacked MarketWatch, Seeking Alpha, & Minyanville. Nothing.
Does anyone out there know anything about that? I'd like to copy the whole thing, not just the excerpt that I sent my son-in-law.
Best, & I wish your friends at AIG luck; if they stick with their talented ways they should be able to skim another couple billion from the rest of us in less time than you can say "Wow look at that market zoom!" (I'm bullish here, which should be good for a day or two.)
SOB.
2008-12-08 22:28:05
AIG to Buy Loyalty
Have you ever heard of the Peter Principle? An individual will rise in the hierarchy of an organization, such as an insurance conglomerate like AIG, through a series of routine bonuses, salary increases, non merit based promotions until he or she reaches the level where they are
in over their head and become incompetent in some if not all of their functional areas. Often it takes years to root out the incompetents in an organization, AIG should consider this a golden opportunity to sack a lot of executives - not pay them extra to stay on. Who, pray tell, would be willing to hire them on at a higher salary in these bad times when they bear the stigma of AIG's failure?
in over their head and become incompetent in some if not all of their functional areas. Often it takes years to root out the incompetents in an organization, AIG should consider this a golden opportunity to sack a lot of executives - not pay them extra to stay on. Who, pray tell, would be willing to hire them on at a higher salary in these bad times when they bear the stigma of AIG's failure?
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