Tuesday, March 17, 2009

AIG bonuses: just a coupla questions

I just read the NYT's front-page article on AIG bonuses.
It provokes a response.

The second paragraph notes that:
The company paid the bonuses, including more than $1 million each to 73 people, to almost all of the employees in the financial products unit responsible for creating the exotic derivatives that caused A.I.G.’s near collapse and started the government rescue to avoid a global financial crisis.
I've got a coupla questions...

The first question isn't about bonuses.
It's much simpler:
What does it take for an AIG executive to be fired?
Forget about bonuses!
Why are folks in the financial products unit - the one that "caused AIG's near collapse" - still employed???

Among the many rationales I can accept for including bonuses as part of a pay package, one would be something like...
"My job is to take risks. If the risks pay off, I deserve to be rewarded!"
... but I'd assume there was a downside as well - most "risks" are "risky" because, well - you might lose!
The imagined rationale would be a lot more plausible if it included a follow-up statement:
"If the risks I take turn out to be really stupid, I lose my job!"
So far I've seen no evidence that ANYONE in the financial sector of our economy EVER loses his job for poor performance!

My second question is related to the following information from the NYT article:
Mr. Geithner reiterated the Treasury position that lawyers inside and out of government had agreed that “it would be legally difficult to prevent these contractually mandated payments.”
My question?

Did the folks who wrote these brilliant contracts on behalf of AIG - you know, the contracts that reward an employee handsomely whether he succeeds or not -... did THESE folks get bonuses?
Are they, too, still employed by AIG???

Just asking.

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