AIG (AIG) Needs To Pay Big Bonuses

AIG (AIG) wants to pay a number of its “key” employees as much as $235 million. Most of the bonuses are meant to retain these people. The Washington Post reports that the reason behind the payments, according to AIG is “we needed to confront the fact that many of our employees, perhaps the majority, knew that their long-term future with us was limited, and our competitors knew that our key producers could perhaps be lured away.”

That point of view seems very reasonable and there is no reason AIG should be asking the government about whether it should make the payments at all.

The furor over executive pay has gotten out of hand when companies which have taken government money cannot keep talent which is critical to their futures. Taxpayers have put more than $180 billion into AIG in one form or another. Protecting that investment by making sure that the insurance firm’s most important people do not walk out the door is essential.

The government has come up with the convenient position, convenient because it shields it from criticism, that simply denying large pay packages is good business. Compensating management for what it is worth is a bad idea even if the performance of that management is at the core of a company being able to do well.

When really essential workers leave some of the firms that have gotten bailout money and their earnings are affected, the fruits of a warped policy will become clear.

Douglas A. McIntyre