AIG, the poster child for financial negligence, announced today it is preparing to pay out $235 million in bonuses to 400 people in its Financial Services division. The same AIG that has received over $180 billion in federal bailout money over the past year, and the same AIG whose collapse nearly crippled the global financial markets. Unbelievable! Unconscionable! Blatant arrogance and greed, and a slap in the face to every taxpayer in this country! Light the torches and get the rope!
But let’s wait a second before we start stringing people up, and take a deeper look at what is going on at AIG. Are they truly this irresponsible?
I have an acquaintance that works with AIG, and this is what I was told. The Financial Services division at AIG is those people who sell insurance, IRAs, investment products, etc. They are NOT paid employees- they do not get company paid benefits, insurance, 401K, or any of the other valuable and expensive benefits that Americans are only now realizing the importance of. They are independent contractors, who are paid commissions and bonuses only on revenue they bring to the company.
What? People being paid only on performance? Well too bad, their company is in the ditch, they should not get their paychecks, even though they exceeded their goals!
I had some very interesting conversations yesterday in a meeting. The first was whether casinos had the right morally and professionally to take tips from casino workers and give a portion to management. On one side, if blackjack dealers make all the tips, and make far more money than the managers, no one ever wants to be a manager. Obviously there is a need for managers. The floor managers and pit bosses certainly have a hand in creating the atmosphere where dealers get tips, so they should get a portion, correct? That was my point. The person I had the conversation with had the opposite view. “Why should a dealer have to give the tips he made to someone else? How is that fair? The casino should step up and pay managers more if that is a problem. This isn’t socialism. Why should the successful people have to support the others?”
Another very valid viewpoint. It is a very narrow fence to be walking on, and one the government is facing on a much larger scale right now. Millions of people unemployed and getting unemployment benefits. Companies like GM are going bankrupt and getting billions in federal aid to stay afloat. Who is paying for that? Why, you are. Your tax dollars at work. If you are working and paying taxes, you are subsidizing the 10% of the working force who are unemployed, as well as the billions of dollars in federal bailout money. And all of those attorneys on TV who are telling you it is okay to file bankruptcy and stiff the evil banks that loaned you money in good faith forget to tell you that every dollar you don’t pay them makes it tougher for them to stay in business; and if companies don’t stay in business, where exactly are you going to work? How does our country support itself?
Is the government morally obligated to support the citizens in times of need like this? Some say yes, some say no. Is the government putting itself in the impossible situation of trying to support both industry and the public with more money going out than it can possibly bring in? Absolutely. Again, it is a very thin line with no easy answers.
The second discussion I was involved in was around capitalism. What is it? The definition in the discussion was the difference between what an employee makes in wages and the dollars his work produces. The difference in dollars is what allows business to make profit, grow, and create more jobs; which in turn allows more companies to make profit, grow, and create more jobs, and so on. It’s a circle of life kind of thing. In this pure form, capitalism is what allowed America to become the power it is. No other country in the world has ever given its people such an unfettered opportunity to create wealth and opportunity. Given that opportunity, Americans have reshaped the world and its economy over the past 100+ years. Capitalism is not a bad thing.
Which brings me back to AIG. AIG, from what I understand, is paying bonuses to the people that are actually bringing in revenue, making a positive contribution to the company’s bottom line, and hitting their financial goals. The agreement they have with AIG is that if they achieve their goals, AIG will incent them accordingly. So in a company that lost billions, we are going to create a national uproar because they are rewarding 400 people that are actually doing their jobs and helping turn the company around? We are going to penalize the people who are helping to slow the economic free fall AIG has been in? We are going to take the money they earned by doing their jobs and support people who didn’t? That is another slippery slope, and it is against the principles Americans have supported for 233 years.
Do I know for sure that these AIG employees all were top producers who deserve their bonuses? Absolutely not: I don’t know that. And if they aren’t, then that should be looked at very hard. But I do think that we should avoid the alarmist, sound bite headlines that we are barraged with and look a little deeper before we break out the tar and feathers. We might actually find some new seeds of growth in the economic waste land we are in.
