By Biloxi
CEO of AIG revealed in letter to Treasury Secretary Geithner (see pic above) that he is dishing out millions of employee retention bonuses to top exec and argues that keeping the "best and the brightest" talent at AIG which prevent the execs to go to competitors. Here is the definition of "retention bonuses" which will show that AIG is really trying to pull a number on the government and taxpayers and the CEO's argument is not going to fly.
Retention bonuses, or "stay pay," is to entice employees to remain through the rough patches of mergers, downsizing and reorganization of the company.
Retention bonuses have proven to be a useful tool in coaxing employees to stay retention bonuses and are often used to retain high-level execs.
However, this is a different situation for AIG. AIG is not merging, downsizing, or restructuring for an another company takeover. This is government takeover with taxpayers' money. Here is an interesting nugget in WSJ. WSJ reports:
Monday afternoon, a White House official said the Treasury Department will use a planned $30 billion infusion into AIG to compel the company to repay the bonuses promised to employees of its financial-products group, which is responsible for selling the exotic financial instruments that brought the company to near-collapse. The infusion, announced March 2, won't be finalized until the company and the Treasury work up repayment options, the official said.
It looks like the government is looking into AIG itself will have to "repay" the government for the bonuses paid. Is it with the $30 million infusion?
As Obama and Geithner are currently looking into legal procedures on how to block AIG retention bonuses, they both have to keep in mind that the taxpayers own 80% of AIG. As a owner of a company, company has control of the company and employees. AIG CEO reports to the taxpayers. The same top execs that continue to fail to repair the company should be replaced.
I hope Obama considers that if AIG CEO is allowed to dish out millions for retention bonuses to execs because Obama doesn't have legal bounds to block the bonuses, then AIG should retropay all of the retention bonuses if they ask for more money or from their company's profits or from the money that have borrowed so far. We shall see how AIG CEO answers to House committee on Wednesday hearing.
5 comments:
If they are contractually obligated to pay out, they are not contractually obligated to retain them as employees. I'm OK with firing them. Maybe they would prefer short term pay, with no long term prospects...
I can't believe that there was not a smart enough lawyer on that staff to have put in a if...the company is... (financial distress, etc) then...no bonuses.
The US taxpayers have 80 per cent shares of AIG and we call the shots. I want our money back and those who brought this company down fired. Feels good to be a major share holder. Just think if I had been a friend of Hank Paulson he would have given me some of that free bailout money with no questions or conditions. No wonder China is worried about the US Economy when the Bush Administration acted like money grows on tress.
I heard rumors they are going to tax those bonuses 100%
I mean I heard they want to tax them, but it still a rumor, but that is one way to get the money back. 73 people more than a million? That's unheard of from a company getting as one of our GOP, congressmen in Illinois said, they are on welfare from the USA.
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