Sunday, March 15, 2009

AIG Bonuses

ROUGH FRACTALS does not often post in reaction to the specific day's news but the justification we heard today for the latest AIG bonuses to AIG Financial Products employees is just plain wrong. The rationale - that if these bonuses are not paid the employees will leave the company. Hello? - anyone still at AIG who is any good (and can get a job elsewhere) is going to leave as soon as they get these bonus checks. Why would anyone who is good (and can get a job at a live company) stay at a dead company except in order to collect these checks? So either way - the good people are leaving.

Why not put these bonuses into accounts that will be paid out at up to 150% of their face amount if certain benchmarks are met and the employees stay for say, 3 years? If they are fired or let go before the 3 year retention period has expired then they get paid what they would have gotten. If they leave of their own accord before the 3 year retention period they forfeit the bonus. That provides incentive, benchmarks and retention. Paying them now will not enhance retention it will simply accelerate the process of the talented rats leaving a sinking ship.

Alternatively, the bonus money could be used to hire new people who have lost jobs and would gladly work hard -like any number of the 50,000 recently laid off financial services workers or retired men and women with financial backgrounds who now need work because of losses in their retirement accounts.

Another red herring is the contract argument. Any law suits that might be brought on contact claims could be settled for a fraction of the face amount of the bonuses and, if done right, suits will be avoided because most people will sign up for the 3 year plan and sign releases.

Andy Borowitz of The Borowtiz Report got it right:

"MARCH 15, 2009
In New Terror Video, AIG Demands Huge Ransom from U.S.
Shadowy Group Seeks Bonuses, Golf Retreats

American intelligence experts are analyzing a new terror video from the American International Group (AIG) in which the leader of the shadowy organization demands billions of dollars from the United States.

In the four-minute tape, which surfaced over the weekend and caused deep concern among U.S. officials, a man believed to be the chairman of AIG says that if his organization is not paid its ransom, "chaos and destruction will rain down on the American economy."

"If we are not paid billions more in bonuses and corporate golf retreats, America will be made to suffer," the man threatens.

Intelligence analysts said that the man, AIG chairman Edward M. Liddy, appears to be speaking at a luxury beach resort that offers few clues as to his exact location, although there is "good intelligence" pointing to the Ritz Carlton in the Cayman Islands.

"We have some reason to believe that he and other AIG executives are there, based on a series of intercepted room service orders from the all-day dining menu," one analyst said.

Reacting to the video, Homeland Security Secretary Janet Napolitano raised the nation's terror alert level to orange, meaning "taxpayers are about to get reamed again."

Treasury Secretary Timothy Geithner also released a response to AIG's latest demands, but intelligence experts said they would need several weeks to decipher Mr. Geithner's response."

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