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Originally posted by UMayBRite!
Many of them do deserve the money. They were promised it and earned it.
However some of them were involved in questionable business that destroyed AIG for the rest. Whoever was involved in that should forfeit their bonuses and be prosecuted
Originally posted by spacedoubt
Are Rich people the new Al-Qaeda? It appears we need a new enemy.
these people may not deserve their bonuses.
However, there was an agreement made.
Originally posted by Dr Love
Seems like this whole AIG thing is just a dog and pony show to keep the public distracted.
Originally posted by Common Good
I always thought that the reason for getting a bonus in the first place, was because the company did good?
The employees in AIG's Financial Products division (AIGFP) were compensated heavily -- perhaps almost exclusively -- via incentive-based compensation. That is, the employees got a profit share -- a rather generous 30 percent share -- of the earnings their division made by trading credit default options (CDOs) and related assets.
In the fourth quarter of 2007, the market for CDOs went completely to hell, an early casualty of the mortgage crisis. AIG, to that point, had already accumulated about $643 million in bad assets on its books. AIG must have anticipated that it was going to spend most of 2008, and perhaps most of 2009, merely climbing out of its hole rather than turning any sort of profit.
This must have posed something of a problem for the employees in the Financial Products division, since their compensation relied on these trades being profitable. So AIG struck a deal with these employees. It guaranteed them, for 2008 and 2009, the same level of incentive-based compensation that they received in 2007 (except for senior executives, who took a 25 percent haircut), regardless of how the division actually performed. The only requirements were that the employees couldn't quit and couldn't be fired for cause (a much stricter standard than the usual conditions of at-will employment.)...
The thing about these "bonuses", however is that they're not really bonuses, which we usually think of as incentive-based compensation. On the contrary, they are something the opposite of bonuses: they took compensation that had been incentive-based and guaranteed it. It's precisely because that compensation was guaranteed -- not incentive-based -- that it is difficult to undo.
The fundamental issue here what I call asymmetrical agency bias. We as human beings tend to attribute our results to skill when we are performing well, but (bad) luck when we are performing poorly. Thus, AIG was willing to pay its Financial Products employees plenty when their trades were going well (assigning them agency for their profits), but was willing to make plenty of excuses for them ("the severe liquidity crisis", "the effects of rating agency downgrades") once things began to unravel. The employees, likewise, may have felt entitled to some large fraction of the incomes that they had "earned" before, and probably didn't regard themselves as culpable for the losses their trades had begun to take.