Sunday, March 15, 2009

Whew! That's A Relief!

AIG is one of the companies whose problems ignited the global financial crisis, and it has been one of the largest beneficiaries of federal bailout money to date. But I guess if AIG can afford to pay out $450MM in bonuses, everything's now jake.

4 comments:

Anonymous said...

Don't mistake this for support for these bonuses, but at least some of the people getting them have employment contracts with AIG that stipulate the bonuses.

Two points:

If AIG doesn't pay them there will be lawsuits and therefore legal fees incurred by AIG. Will they save enough in bonus money to be worth incurring the legal fees? I don't think anybody knows, yet.

If the government steps in and forbids the bonuses, future employment contracts will be of questionable value, as mortgages may be if the feds interfere with them as there is talk of doing.

Having the fed involved in businesses to this extent highlights a lot of unintended consequence issues.

Of course none of this precludes the employees from refusing the bonuses.

What a mess!

Retread

Paco said...

Retread: All that's true, and there's probably nothing that can be done about it. I just thought the "optics" were...unfortunate.

rinardman said...

I don't have a MBA, and I'm certainly not a lawyer, but....how can a "bonus" be part of an employment contract? I mean, if it is mandated, would it no longer be considered a "bonus"?

And aren't bonuses supposed to be paid for good work that helps the company, not brings it to financial ruin?

What a sweet deal. "Help us and we'll pay you millions...hurt us, and we'll pay you millions!"

Ed Snack said...

Rinardman, what about performance based pay ? You know, if you sell $X of product you get $Y bonus etc. Certainly can be part of your pay and allows the company to pay low fixed salaries. Maybe we should also be querying the use of the term "bonus", performance payments are often called bonuses, they're not optional if the appropriate targets are met.