I spent little over an hour today watching the live congressional inquisition of AIG CEO Edward Liddy. Later in the day, I listened to some of the congressmen talk about the case and I wondered if they were watching the same testimony that I was. In particular, I kept hearing this theme of “and some of the recipients of the bonus have left the company!”
Ehhhh, yes. That is the whole point. According to Liddy’s testimony, the $165 million in question was not a performance bonus, it was a retention bonus, and what’s more, it was no ordinary retention bonus. It was a retention bonus promised to AIG employees who had been informed that once they finished tasks X, Y and Z, their jobs would go away. The bonus was designed to incent them to complete their tasks in the face of an eventual layoff. Now quite frankly, I worked for a Fortune 500 company who had the audacity to lay people off and expect them to train their overseas replacements in the time between the layoff announcement and the actual day of separation. Needless to say, many employees by their actions (or lack thereof) gave a virtual middle-finger to the company under such circumstances and no real training of replacements occurred. Truth be told, AIG exercised an option designed to maintain employee loyalty in the midst of a wind-down. While the dollar figures involved might turn your stomach, the actual practice made complete sense.
Despite very clear testimony from Liddy, the story persists that these were somehow performance bonuses, or retention bonuses inexplicably given to departed employees. The fact is the employees no longer working for AIG who received bonuses had completed the pre-layoff tasks they had been assigned. They did their part of the bargain. Which brings me to the next part of my confusion with our legislators. It seemed that a lot of the vitriol today was aimed at the recipients of the bonuses. Now, call me a greedy bastard but if ACME Anvil Corporation offers me a $4 million bonus, I’m going to accept it gladly. The anger of Congress and the people they represent should be aimed at the AIG executives who conceived of this bonus plan and decided to implement it not the employees who were simply the beneficiaries of their company’s reckless decision, assuming you consider the decision reckless in the first place.
Don’t get me wrong. There is lots to be upset about with this situation. We don’t hesitate to tell auto companies to renege on their promises to their employees but we’re hands off when it comes to Wall Street. Clearly a troubling double standard. We’ve declared some companies (like AIG) too big to fail and as a result we reward their incredibly bad (and perhaps criminal) business judgment with bailout money.
It’s all very messy but all I ask is for us to at least get our facts right before we start identifying those who should be drawn and quartered.