Sunday, March 15, 2009


We all seen various articles and headlines regarding AIG's proposed $165 million bonus payments such as this one in the NY Times. But where is the data to evaluate to bonuses?

For all the talk about transparency, you can't help but get the feeling that many of the government's bailout actions have been taken without the benefit of the data or of analysis of the data. So as for the proposed bonus payments, I would like the following data. I want the bonuses broken down by business segment, by groups within each segment, by individual and by type of bonus.

For example, how much of the $167 million is for the group in London that wrote the vast majority of AIG's credit defaults swaps which are the primary reason for the AIG bailout? How many individuals are receiving a bonus? How much compensation did they receive in 2008 before the bonus? How much compensation has that group and those individuals received for each of the past three years?

If the credit default swap group lost hundreds of millions in 2008, one might be inclined to withhold their bonuses. I know, the lawyers say the agreements say AIG is obligated to pay them. Well, AIG probably didn't contemplate that the group would lose hundreds of millions when it entered into those agreements. And even if the results were not an 'out' in the agreements, one might still take the position of 'We are not paying your bonus because of the horrendous results that border on gross negligence. If you want the bonus you are going to have to sue us and face a court of law and the court of public opinion'.

On the other hand, if the property and casualty insurance underwriting made a handsome profit, then maybe some of those bonuses should be paid, especially if they were retention bonuses to keep top performers.

But can someone please get the data and use some good business judgment and that rarest of commodities, common sense.

Cheers, Mike

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