AIG's Biggest "Retention Bonuses" Recipients Left Company

So, these AIG "retention bonuses," they are extraordinary things. Dig the way the $165 million was disbursed, according to the lead paragraph in this New York Times piece:

The bonuses that the American International Group awarded last week were paid to 418 employees and included $33.6 million for 52 people who have left the failed insurance conglomerate, according to the office of the New York attorney general.

Ahh, there we have it. And yet, there's a WHOLE MAGICAL WORLD of MATH that the Times leaves unexplored. Sarabeth at 1115.org, however, has crunched the numbers, and found that it yields a sweet and nougaty morsel:

So not only did 12.5% of those who got the bone-ass money leave, but these guys got 20% of the money. In other words, the guys who left got a much higher average bonus than the guys who stayed: roughly $650,000 versus $400,000. Retention bonus, indeed!

If we want to be precise about it, the average bonus for the retained comes to about $359,016.39 per recipient, versus an average payout of $646,153.84 for those who took their "retention" bonus and split. Seems like the incentives behind these "retention" bonuses are all running the wrong way!

Naturally, it's possible that a few recently departed AIG employees may have made off with particularly large hauls, perhaps driving up the average payout of all departed recipients. Overall, we know that 73 of the 418 recipients got over $1 million, that "11 of the employees no longer work for the company" and that the "largest bonus paid was $6.4 million; seven other people also received more than $4 million each." Sure would love to know what the eight big winners know, n'est-ce pas?

At any rate, with a retention bonus like that, who needs employment?

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Comments

[iluvsam]

My understanding is the idea behind the "retention contracts" was not to get these employees to stay at AIG indefinately. It was an incentive for them to stay and FINISH winding down the accounts within the sub-divisions of the FP division. Once they finished their specific duties, they left. Their pay for this work ("retention bonuses") however were not due to be paid until March 2009.

To make the allegation that they took the money and ran I think is not factually accurate. Everyone seems to be missing the big picture: the problem is with the horrible managment and the HORRIBLE general counsel at AIG who drafted and accepted these contracts and the fact that these employees did not step up to the plate and re-negotiate the contracts in good faith despite their role in bringing the economy to the brink. We don't understand how the employees can be so selfish, greedy, and unpatriotic.

The REASON behind wanting to keep these employees for a limited amount of time is understandable and probably the RIGHT business decision. However, the terms of the contracts themselves and the employees unwillingness to re-negotiate in good faith are the REAL issues.

[PrickliestPear]

"Sure would love to know what the eight big winners know, n'est-ce pas?"

"N'est-ce pas?" means "isn't it?" Which doesn't really make sense in that context.

[iluvsam]

This is proper French. You use this expression at the end of yes/no questions.

[PrickliestPear]

No, it is not.

[quakerfink]

This post demonstrates that the writer does not understand reality. AIG Financial Products is being wound down. It is not a long term career option. In order to stop people from leaving AIG entered into these contracts. Number one, people leaving shows that they have other alternatives, either to retire because they made so much money or to other places because they are viewed as capable of making money for someone else. Number two, these payments were for services rendered last year. People stayed and worked for one year and did not take other employment opportunities because of these "retention payments".

All that being said, the payments are huge and unethical especially considering the amount of money people made for ruining the company and putting the entire global financial system at risk. People need to make arguments with reality in mind

[shepbob]

I'd like everyone to stop and take a breath, even you Jason...

If you've ever been laid off, or had to lay someone off, you can understand that it can do quite some damage to the laid off employee's "company loyalty". All of these people who got retention bonus contracts were told that they were losing their jobs.

What's the first thing you would do if you were told that your job was going away - you would either quit working to find another job, or you would tell your boss and his corporate sponsors to screw themselves. You would not likely offer to work extra hours until the last light was out to help clean up the mess. (Maybe we'd all wish we would do "the right thing", but search your souls a minute).

So management says "stay with us until we are out of business, and continue managing your 'book' - a complex set of interconnected deals - until everything can be sold. If you do this, we will pay you some really 'worth it' amount. Then, you'll be fired!"

This is a little like asking the pilot of a disabled plane being asked to stay aboard to try and crash land, instead of using his parachute and leaving all of the passengers to die. You know, we're really pissed at the pilot, and the airline too, but right now we'd rater have a pilot in charge...

(continued)

[shepbob]

These are retention, not performance bonuses. If you listened to the testimony yesterday by Liddy, you could see that in the long tun, we're more likely to get our money back if we eschew the momentary thrill of vengeance, and let Liddy ramp this company down.

That people who got the bonuses have left is actually a good thing - it means that the load of crap they were managing has been sold off. We'd be better off if the percentage was much higher than 12.5%.

I am unhappy with the way this has been handled. It is a complex situation, uniquely tangled we hope, and needing explanation from our Explainer in Chief. Geitner and Obama should trust the people enough to explain the situation to the people - we voted for honesty and openness. Every day we spend railing about this is one more day that we don't get to work on the agenda that must get done.

[hollace]

These guys in power..all pf them ..are examples of why the middle class has practically imploded.

I get the feeling they sucked and sucked...t­hey swallowed whole the actual future and present...­of

others, disappeared security, trust, and the hard work of others..

I feel sick when I see these guys and nothing really changed..t­hey still rule.

[Harrier]

I always hated quants. I walked out of two jobs to turn evidence against two fortune 500 companies. Unless you have the support of the government up front, you will get fired. I collected information for 2 years each and dealt with the same government officials. My ethics cannot be compromised. When companies see there are more people like me. They will stop doing this. The Whistle blowing law that changed after Valery Plum Wilson the protect the President and allowed them to be vindictive against people gathering evidence against them without fear or punishment.

I can tell you this, it is something I think only a single person can do. But after it's all over, you will truly understand there is a serious war of good against evil. There is never just one evil person. There are always many and they are working together.

There are many heroic people in government. There are many who will give you up for the only reason the program schedule is delayed. Never go to your companies HR first. Always seek services of an attorney

[some-realtalk]

Do you people not understand english --- Liddy said that the retention bonuses were to be given after the employees successfully winded down the specific accounts that they were assigned to. Liddy said that once that specific account was winded down sucessfully by the employee, as determined by Liddy who reviewed the results, -- it was then, after job completeion that that worker received their bonus, and were released form their job. (after they had cleaned up the account). Liddy explained that the intention was never to keep the employees permanenetly hired, the intention was to make the employees successfully complete the specific accounts they were assigned to, and then once they had done that, they would leave the company since that department was shutting down. --- GET IT!

It is like if you owned a company that you were selling ( your workers are to be fired), but you find out that the person buying your company insists that for the sale to be completed all the unfinished projects in your company need to be successfully completed. As an owner (because you know that you cannot complete all the projects on your own, because each one is very complicated, and was designed by specific employees) , what you need to do is to ask your fired employees, who have ZERO incentive to stay, to please stay on and complete some unfinished projects, and you will give them the incentive of a bonus, if they stay and successfully complete the

[Marie62866]

I belief all the contracts should be brought to light! As much as people may disagree with me I am sure that some people deserved the bonuses and some do not! The ones that breached the contracts the money should be taken away! Did the bonuses need to be that big, NO WAY!

I want to know why America is not outraged that these people at these banks/AIG got bonuses for how many years and now we are suddenly OUTRAGED! Cut me a break! Because we where all making money! Lots of money on our investments, our house values increased and we all took it! There is a lot of blame to go around, but the truth is we are all at fault! deregulation was OK because we all made money! Overpriced homes where ok because we all made money! We only have ourselfs to blame!

People can be outrages all they want over AIG but the truth is if AIG fails, it will crumple the economy! Businesses will shut down. no insurance means no businesses will function.

[nana4g]

And who helped to craft these contracts re bonuses? Former Treasury Secretary Palusen and I am sure Bernacke knew about it, as did the former Administration.

[nana4g]

According to Liddy's testimony before Congress today, those "retention bonuses" were given to people who were tasked with a defined "book of business" to complete in the clean up and when completed to satisfaction, they could then leave---with their bonuses. So the bonuses were to keep them on the job until they finished cleaning up an assigned task. Can you believe having to pay someone a huge bonus to stay and clean up part of the mess they made; can you believe they would need that kind of incentive when the mess they made affected the world economy? Some of these people will never have to work again, which is a good thing for them because who would hire them?

Talk about "class warfare"!

[susie1776]

Do you have ANY idea what it costs to recruit and train a new employee for a company like AIG?? No company in trouble wants all their employees to walk away from the sinking ship. If that happens, the company has absolutely NO CHANCE of fixing things. All kinds of businesses in this country use the retention incentive to keep employees on the job until a certain task is completed or because that employee fills a vital, hard to replace job. These AIG employees have managed to reduce the company risk profile by almost a trillion dollars. I see no problem in honoring an agreement. They fulfilled their end of the bargain.

[Acidicscold]

most of the reduction in the risk overhang is due to the devaluation of assets and to the fact that lots of money was paid out. so, no, the AIG wizards did not work terribly hard to make their trillions in unacceptable risk disappear.

[HawaiiBill]

DosGatos2: Thank you for injecting some common sense and decency into the mob mentatlity. This entire situation makes me angry too, but can't people see that this is what those in power want? They want everyone to be distracted from the real problems and the tough decisons and actions that need to be taken. This phony bonus outrage is NOT being explained for what it is by the media. If the media would just explain what a real retention bonus is instead of fanning the flames, they might be able to do some SUBSTANTIVE reporting. Colbert got it right with his "pitchforks and mob" satire, but unfortunately, most people missed his point. It seems they'd rather be angry instead of productive.

[carrieanna]

Yes, I've noticed that the "news" reports about the story seem to be trying to incite a class war.

[jamesreid]

I didn't write this, but wanted to pass on a very witty comment from another blogger...

A.I.G = Arrogance, Incompetence and Greed

[mlaiuppa]

More bad contract language.

If they were paid retention bonuses to stay and they left anyway...t­hey should give the money back.

Sue them!

[nellie]

In the words of Alanis Morissette - Isn't it ironic?