Rewarding failure

[Ravi]

Salary is based on doing your job, BONUS is based on succeeding in making or exceeding your sales and financial goals?

I heard the bonuses in question are retention bonuses, not performance bonuses.

 

[WillowTree]

Salary is based on doing your job, BONUS is based on succeeding in making or exceeding your sales and financial goals?

I heard the bonuses in question are retention bonuses, not performance bonuses.

they want to retain the guys that effed it up?

 

[Ravi]

Salary is based on doing your job, BONUS is based on succeeding in making or exceeding your sales and financial goals?

I heard the bonuses in question are retention bonuses, not performance bonuses.

they want to retain the guys that effed it up?

It does sound crazy, but I'm not sure what employees they are talking about. Hopefully not the crooks. But yes, I think to have everyone leave while the mess is being sorted out would actually be worse in the long run.

 

[Care4all]

Salary is based on doing your job, BONUS is based on succeeding in making or exceeding your sales and financial goals?

I heard the bonuses in question are retention bonuses, not performance bonuses.

they want to retain the guys that effed it up?

SO, they knew back in April of last year they were in DOG POO? They signed retention bonuses with employees who saw the writing on the wall last april that AIG screwed up and was going down?

interesting....

wonder why WE didn't know BACK in april and could we have done something back then that would have lessened the blow, the crisis?

care

 

[DiamondDave]

The whole thing is that a LOT of this should have been already researched when the government was thinking about these bailouts... this should NOT be a shock to Obama, his administration, or the rest of the government... but it is being used like a freaking campaign chant, like they are shocked and disgusted..

We guess what... Obama is not the only one who is allegedly upset... many people are... just as many people are upset with the whole bailout process to begin with...

BUT... this is in the company, not the government... as I stated before, hopefully the company(s) take this as a hard lesson learned about bonus structure and business practices... IMHO they would have learned a better lesson and had more of an incentive to change their practices if they were not bailed out and had to fend for themselves, or risk bankruptcy or buyout by another company

 

[DiamondDave]

I heard the bonuses in question are retention bonuses, not performance bonuses.

they want to retain the guys that effed it up?

SO, they knew back in April of last year they were in DOG POO? They signed retention bonuses with employees who saw the writing on the wall last april that AIG screwed up and was going down?

interesting....

wonder why WE didn't know BACK in april and could we have done something back then that would have lessened the blow, the crisis?

care

They knew they were in dog poo before then...hell, congress did too.. and ones like Frank shrugged it off and actually said all was good and praised the leadership that was going on in the companies... hell, Frank was practically slobbering over the leadership of Freddie and Fannie (yes, I know this is an AIG discussion... just saying though), and look where they are now...

 

[Ravi]

Ah, it was Clinton's fault. Or Carter's. Or Obama's. But certainly not Bush's.

 

[MalibuMan]

Ah, it was Clinton's fault. Or Carter's. Or Obama's. But certainly not Bush's.

I say all the above,

 

[Care4all]

some history of AIG beginnings that i found interesting...

History
The American International Building in lower Manhattan

AIG's history dates back to 1919, when Cornelius Vander Starr established an insurance agency in Shanghai, China. Starr was the first Westerner in Shanghai to sell insurance to the Chinese. Right after the Chinese Civil War which put Mao Zedong and the Chinese Communist Party in power, AIG moved out of China and into New York City. After his business became successful in Asia, he expanded to other markets, including Latin America, Europe, and the Middle East.[citation needed] In 1962, Starr gave management of the company's less than successful U.S. holdings to Maurice R. "Hank" Greenberg, who shifted the company's U.S. focus from personal insurance to high-margin corporate coverage. Greenberg focused on selling insurance through independent brokers rather than agents to avoid selling insurance at prices which occasionally became too low (to cover the future payouts) given marketplace competition. A company with agents must pay their salaries even while selling little to no insurance. Instead, with brokers, AIG could price insurance properly even if it suffered decreased sales of certain products for great lengths of time with very little extra expense. In 1968, Starr named Greenberg his successor. The company went public in 1969.[citation needed]

In the mid-2000s AIG became embroiled in a series of fraud investigations conducted by the Securities and Exchange Commission, U.S. Justice Department, and New York State Attorney General's Office. Greenberg was ousted amid an accounting scandal in February 2005. The New York Attorney General's investigation led to a $1.6 billion fine for AIG and criminal charges for some of its executives. Greenberg was succeeded as CEO by Martin J. Sullivan, who had begun his career at AIG as a clerk in its London office in 1970.[3]

On June 15, 2008, under intense pressure due to financial losses and a falling stock price, Sullivan resigned from the CEO position. He was replaced by Robert B. Willumstad, who had served as Chairman of the Board of Directors of the Company since 2006. Willumstad was forced to step down and was replaced by Edward M. Liddy on September 17, 2008

 

[editec]

Why on earth are we paying for a $6.5 million bonus? Plus all the other people's bonuses we're paying for. How can Obama get up in the morning, look himself in the mirror, and think: "Well, yesterday, I did a good thing. I gave one person a $6.5 million bonus. He sure must be happy."? These people are doing NOTHING to deserve these. And these contracts can easily be broken by doing one thing: not bailing this company out. Then all the contracts can be renegotiated. Doesn't seem that hard to me.

You seem to be missing the obvious here.

WHO do you think is screaming the loudest about these bonuses?

Obama is.

He's not happy about it, he's furious about it.

me thinks he and the others KNEW 'that' ed....

Those bonuses were paid last week, Care.

So I think you're misinformed.

That or I am.

 

[DiamondDave]

Ah, it was Clinton's fault. Or Carter's. Or Obama's. But certainly not Bush's.

It was the fault of company leadership.. the fault of stockholders and boards that did not check things and forecast correctly... it was the fault of past politicians for putting forth standards to lower requirements and force companies to take more risks.. it was the fault of other politicians who were warned and did nothing.. it was the fault of current and recent politicians who did not look at everything before throwing taxpayer money at the problem


The blame is in many places, Ravi... and knows no limit as to party lines

 

[Care4all]

Ah, it was Clinton's fault. Or Carter's. Or Obama's. But certainly not Bush's.

It was the fault of company leadership.. the fault of stockholders and boards that did not check things and forecast correctly... it was the fault of past politicians for putting forth standards to lower requirements and force companies to take more risks.. it was the fault of other politicians who were warned and did nothing.. it was the fault of current and recent politicians who did not look at everything before throwing taxpayer money at the problem


The blame is in many places, Ravi... and knows no limit as to party lines

how did government force AIG to take more risks?

 

[editec]

The whole thing is that a LOT of this should have been already researched when the government was thinking about these bailouts...

Remember that AIG was being bailed out before Obama took office.

And remember that Bush II was told (cause he no more understood this than I do now) that had he NOT bailed out AIG, the economy would melt down IMMEDIATELY (which may be true!)

this should NOT be a shock to Obama, his administration, or the rest of the government... but it is being used like a freaking campaign chant, like they are shocked and disgusted..

It MAY be, though.

Do you suppose that the government has had time to get on board to understand every action of AIG? I rather doubt that.

They have given this company money, but as far as I know they did NOT change managment and they are NOT inntimately involved with its day to day operations, either.

We guess what... Obama is not the only one who is allegedly upset... many people are... just as many people are upset with the whole bailout process to begin with...

True enough.

BUT... this is in the company, not the government... as I stated before, hopefully the company(s) take this as a hard lesson learned about bonus structure and business practices... IMHO they would have learned a better lesson and had more of an incentive to change their practices if they were not bailed out and had to fend for themselves, or risk bankruptcy or buyout by another company

I can sign onto that theory only so far as if we had not bailed out AIG, our economy (and every freaking bank and pension fund on earth) would not have gone insolvent when AIG went down.

So aren't we ALL, Bush II, Obama, you me, everyone reading this -- DEPENDING on the EXPERTS to tell us what is going on?

Now, DD, had you been in BUSH II's shoes on the day that his economic advisors told him:

"Save AIG or the whole banking system collapses"​

What would YOU have done?

Would you have told all your trusted economic advisors that you thought America would be better off if every bank in American went belly up?

Cause that's what Bush II was told.

And here again, I find myself having to defend Bush II.

Politics does indeed make strange befellow.

 

[DiamondDave]

Ah, it was Clinton's fault. Or Carter's. Or Obama's. But certainly not Bush's.

It was the fault of company leadership.. the fault of stockholders and boards that did not check things and forecast correctly... it was the fault of past politicians for putting forth standards to lower requirements and force companies to take more risks.. it was the fault of other politicians who were warned and did nothing.. it was the fault of current and recent politicians who did not look at everything before throwing taxpayer money at the problem


The blame is in many places, Ravi... and knows no limit as to party lines

how did government force AIG to take more risks?

It goes in line care.. AiG is in a lot of it's trouble with credit protection.. that credit stemming from many things including mortgage.. and that is because of government adding pressure to have companies provide loans to ones who would not normally qualify.... not just that, but they were also tied up in market risk, and not knowing as to the true impact a lot of government policy would eventually have on the market... a LOT of this is hand in hand, care

And yes.. THEY should have researched better... not just went on default risk.. not just basking in the glory of increased income at one point...

 

[editec]

It was the fault of company leadership.. the fault of stockholders and boards that did not check things and forecast correctly... it was the fault of past politicians for putting forth standards to lower requirements and force companies to take more risks.. it was the fault of other politicians who were warned and did nothing.. it was the fault of current and recent politicians who did not look at everything before throwing taxpayer money at the problem


The blame is in many places, Ravi... and knows no limit as to party lines

how did government force AIG to take more risks?

It goes in line care.. AiG is in a lot of it's trouble with credit protection.. that credit stemming from many things including mortgage.. and that is because of government adding pressure to have companies provide loans to ones who would not normally qualify.... not just that, but they were also tied up in market risk, and not knowing as to the true impact a lot of government policy would eventually have on the market... a LOT of this is hand in hand, care

And yes.. THEY should have researched better... not just went on default risk.. not just basking in the glory of increased income at one point...

Had the problem been limited to NINA loans going down, this problem would NOT exist.

It was a whole lot more complex than just the mortgage crises, folks.

That was the snowball that started the avelanche but the snow that is flling is from DEREIVATIVE DEBT FINACIANG.

This according to how I understand the problem which is, I'lll readily admit the rather sketchy understanding I get from the media.

 

[Ravi]

It was the fault of company leadership.. the fault of stockholders and boards that did not check things and forecast correctly... it was the fault of past politicians for putting forth standards to lower requirements and force companies to take more risks.. it was the fault of other politicians who were warned and did nothing.. it was the fault of current and recent politicians who did not look at everything before throwing taxpayer money at the problem


The blame is in many places, Ravi... and knows no limit as to party lines

how did government force AIG to take more risks?

It goes in line care.. AiG is in a lot of it's trouble with credit protection.. that credit stemming from many things including mortgage.. and that is because of government adding pressure to have companies provide loans to ones who would not normally qualify.... not just that, but they were also tied up in market risk, and not knowing as to the true impact a lot of government policy would eventually have on the market... a LOT of this is hand in hand, care

And yes.. THEY should have researched better... not just went on default risk.. not just basking in the glory of increased income at one point...

That's idiotic, no offense. The sub prime loans were capable of creating a small recession but they are not responsible for the crap AIG was pulling. That can be tied directly to deregulation...letting an insurance company have the ability to get into the gambling business, basically. I can't believe people still think the sub prime mortgages are the cause of all this mess.

 

[DiamondDave]

how did government force AIG to take more risks?

It goes in line care.. AiG is in a lot of it's trouble with credit protection.. that credit stemming from many things including mortgage.. and that is because of government adding pressure to have companies provide loans to ones who would not normally qualify.... not just that, but they were also tied up in market risk, and not knowing as to the true impact a lot of government policy would eventually have on the market... a LOT of this is hand in hand, care

And yes.. THEY should have researched better... not just went on default risk.. not just basking in the glory of increased income at one point...

Had the problem been limited to NINA loans going down, this problem would NOT exist.

It was a whole lot more complex than just the mortgage crises, folks.

That was the snowball that started the avelanche but the snow that is flling is from DEREIVATIVE DEBT FINACIANG.

This according to how I understand the problem which is, I'lll readily admit the rather sketchy understanding I get from the media.

Yes it was from more than just mortgage... but it does play a big part as it reaches far across the market impact

 

[PubliusInfinitum]

AIG is a separate bailout than Tarp, no? After the current contracts run out with the employees they can and should be renegotiated. From what I read there is the possibility that the employer promised something it couldn't deliver without the bailout money...so that may be one way to legally take away the bonuses.

These bonuses are for the one area of their business that failed....

HOW DOES ONE earn a bonus from a department that LOST $80 BILLION plus last year?

I'm sorry, but this is just a bunch on BUNK from AIG....imo!

Well that depends upon how the contract is written... ODDS ARE that the people being given bonuses are not realizing bonuses on operating losses, but upon reaching contracted thresholds of performance.

If I am the manager of sales and my contract states that I will receive a bonus upon my team hitting 125% in gross sales over, say... last years sales; then when my team grosses sales of 125% of last years sales, I GET MY BONUS... and this without regard for the company reporting a net loss...

There's nothing complicated about this, where's the confusion?

 

[del]

how did government force AIG to take more risks?

It goes in line care.. AiG is in a lot of it's trouble with credit protection.. that credit stemming from many things including mortgage.. and that is because of government adding pressure to have companies provide loans to ones who would not normally qualify.... not just that, but they were also tied up in market risk, and not knowing as to the true impact a lot of government policy would eventually have on the market... a LOT of this is hand in hand, care

And yes.. THEY should have researched better... not just went on default risk.. not just basking in the glory of increased income at one point...

That's idiotic, no offense. The sub prime loans were capable of creating a small recession but they are not responsible for the crap AIG was pulling. That can be tied directly to deregulation...letting an insurance company have the ability to get into the gambling business, basically. I can't believe people still think the sub prime mortgages are the cause of all this mess.

insurance is nothing other than the gambling business. all an actuary does essentially is calculate risks and assign them certain values. that AIG's actuaries didn't perform well is why AIG is in the shitter. they defaulted to picking the proverbial fastest horse and not only did the horse not win, they had to shoot it coming around the far turn.

there's no single causative agent for the current mess; it's cumulative and has had lots of help from all kinds of businesses, politicians and plain old ordinary people.

 

[Ravi]

It goes in line care.. AiG is in a lot of it's trouble with credit protection.. that credit stemming from many things including mortgage.. and that is because of government adding pressure to have companies provide loans to ones who would not normally qualify.... not just that, but they were also tied up in market risk, and not knowing as to the true impact a lot of government policy would eventually have on the market... a LOT of this is hand in hand, care

And yes.. THEY should have researched better... not just went on default risk.. not just basking in the glory of increased income at one point...

That's idiotic, no offense. The sub prime loans were capable of creating a small recession but they are not responsible for the crap AIG was pulling. That can be tied directly to deregulation...letting an insurance company have the ability to get into the gambling business, basically. I can't believe people still think the sub prime mortgages are the cause of all this mess.

insurance is nothing other than the gambling business. all an actuary does essentially is calculate risks and assign them certain values. that AIG's actuaries didn't perform well is why AIG is in the shitter. they defaulted to picking the proverbial fastest horse and not only did the horse not win, they had to shoot it coming around the far turn.

there's no single causative agent for the current mess; it's cumulative and has had lots of help from all kinds of businesses, politicians and plain old ordinary people.

I meant the credit default swaps...I think their traditional insurance side was doing well. But you are correct, there is a lot of blame to go around.