Today, I have four points which I would like to discuss in relation to the debacle in relation to performance bonuses at AIG:
(1) Let’s do away with this talk about bosses committing suicide.
Rhetoric or not, to use the term so loosely is completely irresponsible.
For one thing, this form of talk is completely disrespectful to those whose lives have been affected by suicide.
But even more importantly, it is difficult to judge the emotional state some of the bosses at the center of the scandal. Granted, I find it difficult to imagine that any of them would literally base a tragic decision to end there own lives based solely upon the rhetoric of a senator. Nevertheless, it is not difficult to imagine that there would be at least one or two who are in a somewhat vulnerable state, and talk of suicide, under these circumstances, should not be brandished around so lightly.
(2) Those responsible should resign and make a fresh start.
I am not talking here about people like Edward Liddy, the current chief executive, who has only been at the helm a couple of months and appears to be serious about dealing with the problems.
Instead, I am referring to members of the senior management team who presided over the trading division whilst the bank racked up so many losses. From the bank’s point of view, regaining the trust of both the global investment community and the American public represents a crucial part of its rebuilding process, and it is difficult to see how this can happen with some of those responsible for the crisis still at the helm.
But resignations should not be viewed entirely from a negative perspective. On the contrary, upheaval provides the opportunity for a fresh start not only for the bank, but also for the individuals concerned themselves.
There is no denying that serious mistakes were made. Nevertheless, I have no doubt that the individuals concerned still have a great deal to offer, and a fresh start, with the opportunity to apply their talents and experience in a capacity where their reputations are not so tainted, may be exactly what these individuals need to provide them with the opportunity to make this happen.
(3) The bonuses should be repaid.
The payment of bonuses of more than one million American dollars each to seventy-three employees was completely inappropriate at a time when the American taxpayer is having to shoulder the burden of this kind of bailout.
I am not in a position to make informed comment with respect to the legal issues involved in any attempt to recoup the payments, but from an ethical perspective, these payments should never have been made.
They should now be repaid, and Mr. Liddey’s call for all staff who received bonus payments of more than $100,000 to give back at least half of these is more than fair under the circumstances.
To be sure, a degree of reluctance on behalf of some rank and file employees to return payments to which they were contractually entitled is somewhat understandable, particularly for those who performed their individual responsibilities in a diligent fashion.
Nevertheless, large bonus payments are appropriate only in cases where exceptional performance is achieved by both the individuals concerned and the team as a whole.
Clearly, this has not happened, and employees of AIG should accept that the bonuses of such a magnitude were not appropriate under these circumstances.
(4) Focus on the bigger picture.
Public anger about bonus payments, whilst justified, must not be allowed to detract from the much bigger picture of rebuilding America’s broken financial system in any way.
The financial system is the backbone of American commerce and industry, and the re-building task is for too important for governments and regulators to become distracted by squabbles about bonus payments.
In this regard, the suggestion that bonus payment money be recouped by deducting it from the next tranche of aid money is especially counter-productive. Given that the staff concerned would still get to keep their bonuses, all this would appear to achieve would be the deprival of some of the funds which the bank needs to keep itself afloat and start the rebuilding process, an affect which is counter to the reason that AIG is receiving funds in the first place.
In short, the bonus payments were completely inappropriate, and public anger over them is more than understandable.
But this cannot be allowed to detract from the much bigger picture of rebuilding the American financial system – the fortunes of too many businesses and households are at stake for this to be allowed to happen.
David Dzidzikashvili Says:
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