You have undoubtedly heard that AIG is taking millions of taxpayer dollars (it has none of its own) to pay millions in bonuses to executives in its Financial Products division. This relatively small part of the company is mainly responsible for the company getting into trouble (that and upper management's blindness or willingness to look the other way while the people in FP drove AIG under).
The early reports said that $100 to $170 million was to be paid, but the WSJ says a whopping $450 million.
Various sources reported that Secretary Geithner tried to stanch the bonuses with a phone call, but was unsuccessful. Worse, the CEO is the guy that Treasury put in when we (that is, the American people) took an 80% stake in the company. The excuse for this is that the bonuses are required by contract.
Let me tell you that if I had an 80% stake in a company and the guy running the place told me that he couldn't stop paying those bonuses, he'd be on the street so fast that his head would be spinning. And as for the excuse that there's no alternative, I would ask, "Can you say, 'Sue me?'"
I have a lot of clients who have very good claims of employment discrimination. Companies have no trouble in forcing us to sue to enforce those claims. Let the AIG employees sue. They won't collect more than they will be paid as the company and the government turn tail. Many of them will settle for less. Given that the reasoning behind paying these bonuses is that AIG is "contractually obligated," many of those who sue will lose: surely they cannot maintain with a straigh face that they fulfilled their contracts by being so negligent, incompetent or worse that they put the company it the state it was in last last October.
AIG's excuse is that they need to retain talent. Huh? Retain them? Why weren't they fired months ago?
(The one bright spot is that Edward Liddy, AIG's CEO, was a Bush Administration appointee. A good time to fire him.)