On the surface, it sounds like a healthy company was rewarding its best and brightest. Over 400 employees recently received bonuses. Three-fourths of the company received more than $100,000. Fifty-one employees received $1 to $2 million; fifteen received more that $2 million, and six received $4 million. The highest bonus stood at $6.4 million.
That's on top of a salary we can assume is decent to begin with, given the size of the company. But, hey, this is capitalism. And you reward people for raising the bottom line, making stockholders richer, offering services — in this case, insurance — that betters the lives of your customers and society.
Except for the fact that these bonuses were handed out to executives of a company on the verge of collapse, one that has lost more money in three months — $62 billion in the last quarter alone — than most of us would see in three lifetimes. Bonuses given in a company whose financial troubles are not only inflicting pain and distress on millions of investors, but are also threatening to take down a significant portion of the economy.
I admit I don't comprehend exactly what the insurance behemoth AIG did to get itself and thus the rest of us in trouble. Something about "credit default swaps," what some are calling "exotic derivatives." No matter the explanation, everyone seems to agree: AIG executives made foolish decisions, and the company has no one to blame but itself for its collapse. As Edward M. Liddy, the government-appointed chairman and chief executive of AIG, put it, the company has made mistakes "on a scale few could have ever imagined possible." Who can understand it?
Like most people, I wince at rewarding incompetence. But I also get the idea ...1
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