http://andrewsullivan.theatlantic.com/the_daily_dish/2009/03/why-the-letters.html
I just read the actual AIG FP bonus contract, which was posted on
the NY Times website. Two things jumped out at me. One is that it's
not a "bonus" contract at all. It's an "Employee Retention Plan." In
other words, it's not meant to be structured as a reward for
performance. It's more like just another part of the employee's salary
package. To me it's a lot less upsetting if the payout is part of a
standard pay/benefits package than if it was meant as an actual reward
to reflect on the performance of the company.
The other thing that strikes me as very strange, though, is the
self-stated rationale of the Retention Plan. According to the recitals
section, the contract exists, among other things:
To recognize the uncertainty that the unrealized market
valuation losses in AIG-FP's super senior credit derivative and
originally-rated AAA cash CDO portfolios have created for AIG-FP's
employees and consultants.
I'm not an accountant or a lawyer, but the way I read that is
that, as of the December 2007 effective date of the contract, AIG was
already aware that their CDOs and market cap were diving or preparing
to take a dive, and this was a way of offsetting those losses for the
very employees responsible for those failures.
I've been around the block a few times, and have participated in a
fair few bonus and retention programs myself, but I've NEVER worked
anywhere ballsy enough to say "Hey, you're efforts are destroying this
company, in fact we expect the company to go down in the next year or
two, so here's some money to ensure that you stick around for the
fun." I mean, this is why the letters W, T, and F were invented.
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