Hank Greenberg: AIG Bonuses Were "Based On Performance"

WASHINGTON — Former AIG chief executive officer Hank Greenberg said the company under his leadership never had the kind of retention bonus system that has subjected it to withering criticism.

"When I was there, nobody had a contract with the company, including me," Greenberg said in a nationally broadcast interview Friday. "If you didn't do the job, you didn't deserve to be there. We had a bonus plan based on performance."

Greenberg's interview was broadcast on CBS's "The Early Show" a day after the Democratic-led House approved a bill that would impose punitive taxes on big employee bonuses from AIG and other firms bailed out by taxpayers.

"We want our money back and we want our money back now for the taxpayers," declared House Speaker Nancy Pelosi, D-Calif.

The bonuses, totaling $165 million, were paid to employees of the troubled insurer, including to traders in the financial unit that nearly caused the company's collapse.

"Mr. Greenberg is again trying to re-write history in order to distance himself from the Financial Products group he personally created and oversaw," AIG spokesman Mark Herr said in an e-mail Friday. "The fact is that, under his watch, guaranteed compensation arrangements for (Financial Products group) employees were put in place."

On Wednesday, the current chairman and CEO of AIG, Edward Liddy, told Congress under oath that his predecessor was responsible for the financial problems the company now is experiencing, saying mistakes had been made on a scale few could have imagined.

There have been two other executives at the top of AIG since Greenberg left and Liddy took charge.

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Martin Sullivan, a native of England who had worked with AIG for 37 years, replaced Greenberg as CEO in March 2005, when Greenberg was forced out amid accusations from then-New York State Attorney General Eliot Spitzer of fraudulent accounting.

Former Citigroup Inc. executive Robert Willumstad took over from Sullivan in June, and was succeeded in September by Liddy, former chairman of Allstate Corp.

In his CBS appearance Friday, Greenberg was asked directly if he would have paid out the retention bonuses had he still been at the helm of the company. "Absolutely not," he told the interviewer.

Greenberg also said he didn't think Liddy was qualified to run the company, but stopped short of calling for his firing.

"I think he should be replaced," he said. "You can call it what you want."

Greenberg has sued AIG, saying the company that he led for 38 years misled investors about its exposure to subprime mortgages and ruined his fortune by lying about its financial health.

The lawsuit filed earlier this month says Greenberg was the New York-based company's largest non-institutional shareholder. The company has said the suit is without merit.

Greenberg said that AIG once was "the greatest company in history." It had been the world's largest insurer with clients all over the globe.

"Was there fraud? Was there whatever. I think it's stupidity. Well, do you punish stupidity," he said.

The bill was passed on a 328-93 margin despite sharp Republican attacks calling it a legally questionable ploy to cover up Obama administration missteps on this issue.

House Minority Leader John Boehner, R-Ohio, said the bill was "a political circus" diverting attention from why the administration hadn't done more to block the bonuses before they were paid.

Although a number of Republicans cast "no" votes against the measure at first, there was a heavy GOP migration to the "yes" side in the closing moments. The bill now goes to the Senate.

Comments

[dianhow]

AIG got performance bonus's ? B.S.

[Dana Stern]

AIG in a quest for profit exploited every loophole in the law. Ethics, honesty, feelings of responsibility for it's clients money never was a concern. Neither was there a concern for the American people. AIG management is part of the new emerging Corporate aristocracy that says "let them eat cake."

The bush administration remains co-conspirators for it's parts in doing the pioneering bailout of eighty-five billion dollars. The government had never done that before. Then of course their were the expensive trips to resorts and hunting trips for the AIG elite at taxpayers expense.

What has come out of this is that there is a Corporate Aristocracy that literally answers to no one, not even themselves.

[DickieD]

No one has even gone to the root of the problem. Which is, politicians, and campaign funds.
We either have to have term limits, or a means to control campaign contributions. Since it is not feasible to limit the amount of a contributions. Then we must pass a law or amendment that allows contributions to only be made to a party. The party must then distribute these funds in equal amounts to all viable candidates. There also need to be a 12 year limit on politicians becoming lobbyists.
One other thing needs to be in place, and that is stock holders have a vote on executives salary, and bonuses.

[drjrf]

Greenburg must think that middle class american's are stupid-that is the only way he can use the word stupidity! It was "Greed and Fraud" that got us where we are w/ AIG. There are "MANY" qualified people who are out of work that would be gladly do thoes executives jobs and would do them better just for a descent salary. Greenburg is sueing AIG for his "Stupidity and Fraud", well I guess the next thing is flying Pink Elephants! What a horse cart full of manure. Reading this article only explains where if there was "Stupidity" who acted stupidly, yet you and I know it was greed and fraud Mr. Greenburg so you better go to Plan B because your Plan A stinks like the crap you're shoveling.

[NevaforLeadership]

Nancy Pelosi,

Give us a break. You were the one front and centre pushing for the bailout to be passed!

[Roberto31]

Nancy Pelosi does not believe in democracy or transparent government. These liberal control freaks are afarid someone will see what they are doing behind closed doors and squeal to high heaven. She needs to go back to whatever she was doing. She is worth over 100M today with not one dime of it being in her bank account before she ran for office. Liberals use and abuse government to get rich. Lyndon Johnson and Al Gore is doing it now. Disgusting. They make the wall street crooks look like amateurs!

[Patricia Erickson]

I have to disagree with you Roberto. I find it very hard to believe that Lyndon Johnson is doing it now, since he has been dead since January of 1973. How sure are you of your facts before you post a comment?

[JoeSchmuk]

' "Was there fraud? Was there whatever. I think it's stupidity. Well, do you punish stupidity," he (Hank Greenburg) said.'
Well, you may not punish stupidity, but you certainly don't reward it! That would be stupid.

[FloridaMich]

stupid is as stupid does

[racetoinfinity]

Getting to the truth requires some reading and research at this point.

I recommend the following two articles I came upon recently:

From Empty Wheel - "The Sucide Explosive in the AIG Deal" -

http://emptywheel.firedoglake.com/2009/03/15/the-semtex-in-the-aig-retention-contracts/#Respond

and

from fivethirtyeight - "Why AIG Paid the 'Bonuses'" (quotes around "bonuses" intentional) -

http://www.fivethirtyeight.com/2009/03/why-aig-paid-bonuses.html

[NevaforLeadership]

Thanks for the interesting article.

However, smoke and mirrors.

Resignation of the senior managers! They should have been fired without bonuses and replaced before there was any chance of their resigning.

[richardgordon]

Great articles. Thanks for the links.

[othel]

I have naive observation. How many other financial institutions (hell any business) provide obnoxious amounts of money to employees in the form of bonuses when their respective company loses money? I received bonuses in the years I worked - when the company did well. When it didn't, not only were bonuses not given, I took a salary cut!

[NevaforLeadership]

Exactly.

However, even if these greedy incompetents were to receive bonuses they did not deserve, if the taxpayers hadn't rescued the company, they would not have received salary compensation, let alone bonuses; they would have been pounding the pavements, unemployed.

So whether they should have received bonuses for whatever reason -- expertise, "indespensability," contracts, prevention of default triggers -- is a moot question. The answer is no.

The government ownes AIG and should have written its own contract to prevent any bailout money going towards bonuses. There is no getting away from it, the government is at fault here.

[vanron100]

Here's the problem...

Paulson (+ Geithner, Bernanke, etc) designed this 'Ponzi' scheme (TARP). We understand everyone wanting us to buy more stock in order to keep the market up...fix the system...then we'll have 'confidence' to invest.

And that FIX is simple and oblivious, but everyone seems not to be addressing it directly...
- it's 'Corruption-Corruption-Corruption'.
ie. special interest groups, earmarks, lobbyist, elimination of rules and regulations, the financial sector having contributed over $5.2B to political campaigns, same people who got us in this mess are now tying to get us out (humanly impossible...they will, and have instead spent most of the time & money trying to cover-up the industry's underlining behavior).

Corruption is the 'root' problem here...as it is everywhere. Until that gets fixed first...everything else is redundant...we're just pouring $$$ into the abyss! Wall Street has always been Ponzi Street, and the Golden Rule always applies; 'never invest $$$ you can't afford to lose'.

Fix the 'corruption' - then we'll have 'confidence'.
The solution – 'Transparency-Transparency-Transparency'.
How? Start now Restructuring (nationalize, fix, resell) all these financial institutions - the FDIC does this every day.

[rtmtr]

I'm sure this is a naive observation, but I am curious. I gather that part of the problem with AIG is that if they don't meet some of their obligations to counterparties that the integrity of the economic system (US & world) will be threatened.

Would it be possible for the US Gov't. as 80% owner of AIG to cut out some of these middle-men and deal more directly with those counterparties whose demise would threaten the world economic order?

Second question, I guess that all of these investments (CDOs CDSs, etc.) had some measure of risk associated with them when they were purchased. Is it necessary to pay off 100 cents on the dollar in order to save the whole system?

[mommadona]

Anyone got this guy's address?

[LynnW49]

Greenberg is doing nothing more than drawing attention to himself as the Chernobyl of AIG. He should be quiet or go to jail. As a leading figure in the pantheon of High Criminals, he should not dare to mention Ed Liddy's name, let along pretend his actions are Liddy's fault.

[NevaforLeadership]

He's been pushing in ever since this AIG fiasco started. Sour grapes. He was fired, wasn't he? He's stuck holding a bagful of AIG stock.

[CtheB]

What a show...

"With the rich man in his summer home... sayin, just leave well enough alone...
well his pants are down, his cover's blown !

"It aint dark yet... but it's gettin there"

[MomfromTexas]

"Greenberg has sued AIG, saying the company that he led for 38 years misled investors about its exposure to subprime mortgages and ruined his fortune by lying about its financial health."

Then he said:

"Was there fraud? Was there whatever. I think it's stupidity. Well, do you punish stupidity?"


A little contradiction there, Mr. Greenberg? You're suing for AIG's misleading investors and lying about their financial health, but this is "stupid" and not fraud? Really?

[Bobolini]

The whole concept of retention bonuses in financial services industry at this time is really crazy. Highly qualified people are begging for jobs and would gladly take over any position offered to them at a pay cut, sans any perks.

During the "bubble boom" retention made sense because smart, qualified people were hard to find. If you put these dolts jobs on the market right now you will have a thousand plus resumes of excellent people ready to go to work.

As an insider whose job it is to translate gobbledygook I can tell you a lot of these terms are made up to obfuscate real meaning and blur our understanding of the industry's stupid moves and thoughtless policies.