Monday, March 16, 2009

The rot underneath the AIG bonuses

[updated 12:38 pm]
By now I'm sure you know that AIG, which is being propped up by our tax dollars, has given out multiples of millions in bonuses, including many to executives in the financial products unit. This is the division that not only destroyed the company, but also played a major role in sinking our economy. The fact that AIG is using our money to pay off a bunch of failures is infuriating enough. Actually, that's beyond infuriating, but one can only scream so long. What really frightens me is what this says about the culture of AIG and our no-longer-beloved financial industry.

Giving out bonuses to the fools who destroyed your company means that your business is not based on success, but only on the illusion of success. It means that the quality of a person's work has absolutely no value at AIG. If it were, then only people who actually did a good job would be rewarded. The only thing that appears to be is of value at AIG and the rest of the financial world is whether or not you can get some idiot in a company to sign a piece of paper that rewards you no matter how well you perform.

No wonder AIG and the financial industry failed.

Here's the real bottom line: No bailout can save AIG or the rest of the financial industry until the financial "titans" change their own culture. Right now their culture rewards failure and illusion. How can they possibly expect to sustain their companies by acting like that?

I say put the janitors in charge. At least janitors know the value of doing the job right.

[Update]
Apparently, The New York Times underestimated the AIG bonuses. The Wall Street Journal reports:
American International Group Inc. will pay $450 million in bonuses to employees in its financial products unit. That division was at the heart of AIG's collapse last fall, which compelled the U.S. government to provide $173.3 billion in aid to keep it running.

1 comment:

bcavert said...

You write: The only thing that appears to be is of value at AIG and the rest of the financial world is whether or not you can get some idiot in a company to sign a piece of paper that rewards you no matter how well you perform.

I find it fascinating that the private sector is always pushing for teachers to let go of the seniority system in favor of a fabulous merit pay system that is so stunningly corrupt.