American Morning

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March 17th, 2009
02:30 PM ET

Commentary: "We owe you more"

 Schlesinger appeared on today's American Morning to discuss the economic issues of the day.
Schlesinger appeared on today's American Morning to discuss the economic issues of the day.

From Jill Schlesinger, Financial Advisor – Special to CNN's American Morning

Editor’s note: Jill Schlesinger, a certified financial planner, is executive vice president and chief investment officer of StrategicPoint Investment Advisors, which is based in Providence, Rhode Island.

I appeared on CNN's "American Morning" at 7:30 am today, ostensibly to provide commentary about the payment by beleaguered insurance giant AIG of $165 million in bonuses for last year. The interview turned into a brawl as the other guest vilified me and all of Wall Street for the AIG bonuses – in his mind, the compensation issue was in fact the root of the whole financial crisis. I did not get the opportunity to talk about what is missing from that analysis.

I came off the set thinking that we owe you more than a divisive, populist shouting match. Analysts, broadcasters and journalists of varied stripes owe you the nuance of the story, not just the headlines. We need to find the space between the poles that divide us so that we can discuss and understand the grey areas of this complicated and important subject – that is where the truly important policy decisions lie and where the impact on our economic future can be found. So here is the grey area surrounding the AIG bonus/Wall Street compensation story that I was not given the chance to articulate this morning.

As the financial crisis has unfolded, it is understandable that we seek to lay blame-that's human nature. Let me plainly state that every financial crash needs a number of willing participants-this crisis is no different:

· Wall Street firms assumed ridiculous risks and let down their shareholders;

· Boards of these firms rubber-stamped compensation packages that were astronomical and didn't appear to understand that risks that underlie returns;

· Shareholders allowed board directors to keep their posts because the companies were making too much money to make waves;

· Lenders and borrowers alike got caught up in the booming housing cycle and lost their heads;

· Lawmakers on both sides of the aisle were unwilling to act like adults;

· The Clinton and Bush administrations were huge fans of deregulation that helped augment the bubble's progress;

· Regulators were too lax in their enforcement activities, as they usually are during raging bull markets;

· The Federal Reserve under Alan Greenspan maintained a low interest rate policy for too long; and

· Too many Americans forgot the simple rules that we learned from our parents: don't spend more money than you earn, and save a little bit from every paycheck.

With that said, let's get on to the matter at hand: the structure of compensation in the financial services industry. To understand this area, you need to accept that these people earn a TON-precisely because over the past umpteen years, they have been extremely profitable and have been in the business of making what everyone wants: money. Most Wall Street firms started as partnerships, where a bunch of guys took very low salaries, pooled their money, invested it or advised others, and hopefully at the end of the year, there were profits to split and those profits were called bonuses. That structure worked well in its day, but probably stayed in place too long and needs to be updated, but it is still the norm on Wall Street.

Here is an example of how the system works today. "Jennifer" is an employee of ABC Securities. When she was hired, she was told that her "total comp" would be $300,000, comprised of a $100,000 base salary and up to $200,000 of cash and stock "bonus" that is discretionary based on her performance. Jennifer's bonus was not intended to be subject to the profitability of the firm, because that is not how the deal was structured. Yes, the second part of her pay is discretionary, but in most years, as long as Jennifer performed her job and her business unit did its job, she would earn $300,000. In that sense, the term "bonus" is a misnomer-it should really be called deferred compensation that most employees use to manage their own financial lives. And in fact, many Wall Street employees took large cuts to their total income last year due to the terrible conditions that existed at most firms.

There is a big difference between these discretionary bonuses and the AIG situation. The AIG $165 million represents legacy "bonuses" that the company was contractually obligated to pay. Yes, I know that it seems unfair that we taxpayers are making these payments, but when the government forked over the fist bunch of money to AIG last fall, there were no compensation strings attached. I think that the rationale behind that decision was two-fold: (1) the severity of what we were facing was so acute that some details were simply not covered, and (2) the government was concerned that the new management of AIG be able to retain a core of their best people to help wind down some of the most dangerous aspects of the business. (Remember, this was a mere fraction of the total amount AIG received – the real issue is where did all the rest of the money go, which a totally different conversation.) Without a guarantee, many would have fled the toxic environment and left AIG in an even deeper hole.

This is but one small aspect of the crisis and yet it is so easy to scapegoat "greedy Wall Street" as the cause of all of our financial woes. Focusing on the bonus issues – while playing to the real anger that exists out there – diverts attention from the bigger issues and makes this about class warfare and not about basic good governance and risk controls – whether in the administration and oversight of TARP funds or the regular conduct of AIG's and other recipients' business. The more sophisticated approach demands that we assemble the facts and accept that the there is no one person, institution or class of people that is responsible for the mess. We got into this together and we will emerge from it together. So let's stop shouting and start talking like responsible adults-we owe it to one another.

The opinions expressed in this commentary are solely those of Jill Schlesinger.

Filed under: Economy
soundoff (467 Responses)
  1. Janet Boulter

    I absolutely believe in adhering to contracts- as in the case of the AIG bonuses. However those bonuses should have been based on performance and given the dire financial straights the company is in- the executives should voluntarily decline their bonuses and reduce their compensation.

    If you are skilled and talented enough to be in an executive position then you should have strong enough ethics to know right from wrong. Those bonuses have not been earned. I don't know how those individuals can live with themselves, taking tax payer money to reward themselves for failure.

    March 18, 2009 at 7:33 pm |
  2. StormerF

    YOU see how the Media can,distort thr truth?..Obama,signed the Stimulis package with the AIG loop hole in it..The Media did not bring up the fact that Obama did not read the bill,he just signed it....Now the Media will circle the Wagons to protect their HERO. Not matter if the Bonuses were deserved or not,Obama's Administration dropped the ball.

    March 18, 2009 at 7:21 pm |
  3. David MacDonald

    Whether we agree or disagree with you, my position is that we should have been able to HEAR you. The other guy had no right to just keep talking over you. Not much enlightenment there. 😉

    Dave MacD
    Pittsgrove, NJ

    March 18, 2009 at 7:19 pm |
  4. Pat Langlois

    Who really cares about a Wall Street exec and 30M in bonuses. Let's deal in the real world. It is a joke that anyone could attempt to justify a bonus of any amount to these people. They obviously did not do their job? Do they think they are rock stars? This is tax money we are talking about. They are NOT entitled to it. Surely you can see that the American people today are struggling to buy food for their families, pay their mortgage payments, car payments, etc...........Let's hear as much outrage about those topics. Let's hold some hearings in Washington about that. How many mortgages in middle America do you think you could save with one of those bonuses? Everyone in trouble is not a bumb. People are out of work-don't you get it?

    March 18, 2009 at 6:04 pm |
  5. ann / kentucky

    AS well as AIG, all political contributions should be returned as well. Not only those reieved from AIG, Senator Dodd, but also those from Fannie Mae and Freddie Mac Rep. Frank.

    Something just doesn't seem right – Senator Dodd received the most campiagn contributions, he writes the amendment that allowed this. If he wants private citizens to give back money, his campaign sould as well.

    March 18, 2009 at 5:47 pm |
  6. GLG

    The most interesting thing to come out of Liddy's hearing so far was that he was only communicating with Bernanke at the Fed. That backs up Geithner's assertion that he didn't find out about these bonuses until last week. I also hope the media makes clear that Bernanke is not a part of the Obama administration. The Fed is a separate entity and Bernanke was there under Bush as well. That's an important point and may seem obvious to some of us but I'm sure many in the public are not aware of the distinction.

    March 18, 2009 at 5:21 pm |
  7. Jacqueline Rollins

    The government should not be bailing out any businesses, period. If you run a company that employs people who mismanage the companies money, you simply fail, thats it, end of story and hopefully learn a valuable lesson, We have too much government control all ready and no one is standing up and taking notice. Business are mismanaging money so lets give them more money, oh, wait, even better- lets give them other peoples money (taxes) and now we have government taking from the poor to keep the rich in the style to which they have become accustomed. After all, taxpayers cannot do anything to us, we are the government.

    March 18, 2009 at 4:32 pm |
  8. Debra

    A question for anyone….. Would the employees that received the bonuses gotten paid WITHOUT a bailout ? What’s the status of the “contracts” for bonuses if AIG didn’t have the money ?

    March 18, 2009 at 4:18 pm |
  9. mother of all mothers

    I think it is ridiculous to threaten these employees and their families. Yes, they should return all the bonuses! We have the right to be outraged, but should let our legal system handle the situation.

    Why isn't everyone screaming about Congress and their expenditures and lame excuses for travel expenses. Those old coots should leave Congress and give the younger and smarter generation a chance to fix the mess they have us in. This whole mess is from greed, not only from these large corporations, but from corrupt and greedy politicians.

    March 18, 2009 at 4:15 pm |
  10. Bob

    A day late, but I do remember the segment very well. I do appreciate your follow up post and it is truly a shame that you didn't get a chance to present your thoughts on air. Mr. Mack was behaving like a typical bully, and Ms. Chetry was unable to control the interview.

    I would like to know more about how credit default swaps were employed by AIG and apparently were the instruments that virtually brought the company to its knees. As I understand it, AIG still has a tremendous exposure to them.

    Hopefully, we'll get a chance to see you on air in the very near future.

    March 18, 2009 at 4:09 pm |
  11. Patti

    I am outraged by this whole issue and do not take kindly to anyone defending taking my money to give to irresponsible and apparently incompetent business. Wall Street is a gambling enterprise as surely as is las Vegas. They have used other people's money to fatten their own purses for far too long. When they come crawling to my federal government for what amounts to my tax money, then they have to take restrictions, conditions, strings, and possible even humiliation. Bonuses to losers – bah!

    March 18, 2009 at 2:56 pm |
  12. Joseph Saronge

    You did not get it right on this one. No matter what argument is put up, It is morally wrong and that stands. You may put the best argument in the book to support the wall street but it simply does not sink in. The women in pink summarized it all too well. They carried waved their placards and they put up a brave face to show that awarding of bonuses was in fact greed and should not have been awarded. If the argument is that they were going by their contracts then the existing contracts have been and will remain unjustified

    March 18, 2009 at 2:31 pm |
  13. BB

    The bonuses should not be given back. They were included in the contracts that were agrred upon before the "bailout". This is the fault of the administration. Their arrogance into thinking that they can now bully someone into giving back their pay is just a glimpse into what possibly lies ahead for America.

    March 18, 2009 at 2:22 pm |
  14. pete jensen

    Jill Schlesinger rightly lays a portion of the blame on Board's of Directors in failing to adequately assess risks in these operations (some leveraged well above 95%).

    Too often (spell AIG and Enron) the Congress has ignored the fiduciary role of the Directors to Stockholders. I'd hazard this is due to the political connections of those directors.

    Since the U.S. now has something like an 80% position in AIG, we have the option of starting to clean house at AIG by 'voting in' a new set of Directors. Not rocket science!

    pete jensen

    March 18, 2009 at 2:21 pm |
  15. Deb Huntlet

    A question for anyone..... Would the employees that received the bonuses gotten paid WITHOUT a bailout ? What's the status of the "contracts" for bonuses if AIG didn't have the money ?

    March 18, 2009 at 2:11 pm |
  16. Kent T. Tamura

    AIG bonuses/ when are these companys going to stop this shell game of "It wasn't on my watch" and using the law to protect their greed. The American people are being held hostage with threats of collapse and the behind walls decisions to rush bonus payments before any objections can be made. BS

    March 18, 2009 at 1:45 pm |
  17. Susan S

    All contracts have provisions in small print that mean they can be abrogated by unusual or special circumstances (health insurance companies have been using this feature to rake consumers over the coals for years)'t should use this to get the money back.

    Meanwhile think about this–the amount of $$ given in AIG bonuses would run the YouthBuild program for two years for the ENTIRE country–a program that actually helps the economy, and is chronically underfunded. (See Michele Obama's visit to their 30th anniversary build on the mall, yesterday.) $1 million + $2,740/day. GIVE IT BACK!

    March 18, 2009 at 1:41 pm |
  18. Tom

    The Cliffs Notes version of the article: basically we're too stupid to understand the intricacies of compensation on Wall Street.

    They get paid huge bonuses in down years and even more huge bonuses in good years? It's not so much a pyramid scheme as it is a confiscation scheme. But since that is apparently standard operating procedure, I guess it's okay.

    We wouldn't want them losing their country club memberships.

    March 18, 2009 at 1:36 pm |
  19. Ian

    AT LAST! Someone has the intelligence to stop the witch-hunt over "bonuses" and realize that most of these are part of the total compensation paid to employees FOR WORK ALREADY DONE. I know I'd be really if I worked and then was told that I am not going to receive my full compensation. That's the way it works, I'm afraid. Get over it. I pay my taxes, too, but I do not think taht people should not be paid what they are due because of the state of the economy.

    March 18, 2009 at 1:34 pm |
  20. Edmundo

    Although contractually and legally binding, these bonuses are immoral in nature. Come on! How greety can we be in society this society and still be appropiate??? We are talking about millions of dollars for "some" executives! This while there are hundreds of thousands jobless Americans who in cases are experiencing extreme financial hardship – which by the way, is the outcome of the actions of the same greety executives that justified the means of getting into highly risky deals by the ends of getting even richer. I bet to some of those folks one more million dollars didn't even carry a heavy weight in their accounts. But you know what people, I blame it all to every single one of us for lowering our moral standards as society, and perceiving actions like this as the norm. Perfect example, one of the news reporters from CCN challenged these executives to return the bonuses as a moral redemption, and the reaction her co-worker was of sarcasm and cynical in a very much ridiculing manner.

    March 18, 2009 at 1:33 pm |
  21. RA

    So I was "censored" yesterday when I tried to post some relevance.

    This controversy is all class envy. How is your life going to be different if the bonus money is taxed or returned?

    Get real, the pols screwed this up with the provision by Sen. Dodd inserted at the last minute to TARP that exempted contractual bonuses agreed upon prior to Feb. 11, 2009.

    None of our illustrious politicians bothered to read the TARP Bill before jamming it through. They have no one to blame but themselves and Sen. Dodd.

    March 18, 2009 at 1:30 pm |
  22. John Morse

    Well said but I believe President Obama has the right site picture and there will be much more scrutiny to come...AIG and its employees will take a beating one way or another. I offer this to AIG as a possible solution to their a voluntary program within your company that each bonus recipient could voluntarily place their bonus into a trust fund. Then in 6-12 months, we will evaluate how well AIG has recovered / performed. If their performance warrants a bonus at that time, then they can retrieve bonus. This will also ensure AIG employees are working hard to solve their economic crisis.

    March 18, 2009 at 1:07 pm |
  23. Jeff B

    AIG bonus.

    The U.S. Government should take a little blame here. They originally had no restrictions on how the bailout funds were to be used. It seems reprehensible that tax payers are funding bonuses at AIG. However, AIG was legally obligated to pay those bonuses or could face litigation and damages by CT law could have been double the original payouts. Let's move on and start cleaning house at AIG. Clean up what can be cleaned up at AIG and then liquidate what we can.

    March 18, 2009 at 1:05 pm |
  24. ConsiderThis-FL

    I have a question: Would these people have been paid their obscene bonuses if the government hadn't given AIG billions in bail-out money? Would these people have been paid their obscene bonuses if the government had allowed AIG to fail? I think not! So there goes your argument; right down the toilet.

    March 18, 2009 at 1:02 pm |
  25. Karen Campbell

    Why don't we now fire those employees that received the bonuses. Let them stand in the umemployment lines. I would hate to see them remain in power without any consequences!!!!

    March 18, 2009 at 1:01 pm |
  26. Robert in CT

    Can you explain that if AIG insurred the bad loans from the banks, as the loan went bad-AIG with no assets could not pay so we the people gave AIG money to cover those losses. So why, if the banks were paid by this insurance from AIG (now us the taxpayer) are the banks in trouble?

    March 18, 2009 at 12:55 pm |
  27. Albert

    The Corprate CEO class is driving this great nation into the ground and all I hear is excusses.

    March 18, 2009 at 12:02 pm |
  28. Bill Powers

    Well,I must say you explained the bonuses.But it seems you forgot one inportant thing and that is they're still losing money. So it would seem that no one at AIG is doing their job.They should have been fired.As far as who added the loop hole in the contracts. It could have been anyone of the money grubbers. The gov't and these big companies have their hands in each others pockets. and now they have them in ours

    March 18, 2009 at 11:49 am |
  29. Jamie Shiner

    In other words this company should have been allowed to fail first and then the Government should have restructured it . I am sorry I did not understand the Greed of some people, I thought these people would do the right thing to preserve their reputations. I guess there is no honor among Thieves.

    March 18, 2009 at 11:22 am |
  30. Bob Asato

    1) Bonuses are good if earned.
    And bonuses should come ONLY from profits from the operation.

    2) Suggestion for the AIG crisis – "economic stimuluus" for the taxpayer = pay back everyone who invested (tsa's, etc) and trusted AIG as of 12/31/08 = best use of TARP monies. Corporations should die naturally = they deserve what they planned or not planned for.

    3) And, why are the CEO's of the large banks, auto mfgrs, etc that are receiving TARP monies are still running these bankrupt companies?

    March 18, 2009 at 11:08 am |
  31. Richard

    Thank you Ms. Schlesinger for providing us with your opinions in this forum. The discussion yesterday was of interest to me and I wanted to hear your opinions. Unfortunantly, you were not given that opportunity during the show. Your fellow guest was rather rude and his behavior detracted from what otherwise would have been an interesting discussion. I expected better from CNN guests. As far as the AIG bonuses are concerned, in companies I have been familiar with, during tough times the management declined to take bonuses and in some cases cut their salaries to limit the impact on the employees. Even though they probably could have taken a bonus it just wasn't ethical.

    March 18, 2009 at 11:06 am |
  32. Moore, Baltimore

    I do not understand the issue raised by this executive. We are not suggesting that they refuse to honor the contractual obligations to the others entitled by contract. We are simply suggesting that they wait until the financial picture gets better before allowing them to draw the money out of the fund.

    In all other situations, the employee is made to wait until Finance determines it to be the right time to draw the money out of the trust. Think about retirees; they go to seminars to explain the atmosphere for retiring. If they chose to leave, they may be penalized based on that atmosphere. Why are we allowing these people to hurt the American economy?

    March 18, 2009 at 11:01 am |
  33. Amanda Kieling

    This was included in the bill when the bailout money went to AIG. Now American's are outraged over something that was written into a bill. Now the Democrats want to tax 100%!? Why? They voted to give AIG the right to include the bonuses, not to mention, they were in the contracts that the employee's signed. That's a legal document.

    March 18, 2009 at 10:43 am |
  34. Bob the Googler seems to be allergic to letting readers know that Ms. Schlesinger's company used to use "10 Lies of the Financial World" as a promotional article. (They've deleted the long version of my comment twice.)

    Google "StrategicPoint Investments Advisors" and "10 Lies of the Financial World".

    When Ms Schlesinger turns to defending Wall Street and AIG's bonuses, her commentary seems to be directed to delivering a ridiculous wholesale defense for Wall Street (and/or her company's clients?) rather than truthfully and realistically analyzing the situation.

    At CNN TV and, apparently a little hypocrisy goes a long way.

    March 18, 2009 at 10:26 am |
  35. Curious George

    I am concerned with Jills point "I did not get the opportunity to talk about what is missing from that analysis.", not so much on the bonus question, but rather the rest of the story that is untold. When do we get to understand how we bailed out the banks for toxic securities, then discover in the underlying story, not being reported, that the banks had insured their toxic security losses through AIG and are being 100% compensated for those toxic securities? I may have this wrong, but sounds like a bigger story here. Are we not bailing out the banks twice for the same loss? We thought Bernie had a ponzie scheme going, bonuses are nothing in the grand theft taxpayer scheme here. By the way even if governement ever re-coups the money from AIG bonuses, do you really think the taxpayer or their cjhildren will ever have their tax debt credited? It will go the same way as the raided Social Security, Air TransportationTax money, and just be additional money to be spent on some congressmans pork amendment.

    March 18, 2009 at 10:16 am |
  36. Gordon Davis

    You have got to be kidding, first of all, this "new" controversy has been going on for at least 15 years. It's tied in with the rediculous rise in CEO and upper management saleries.perks, I work for an airline, we have had five CEO's in 15 years, about 3-4 of which were profitable. Every one, CEO's, upper management, left (they always leave) with big payouts. Our labor group has been langusihing under a bankrupcy contract for years now. This big pay no matter what the company does kind of mentality has got to be stopped.

    March 18, 2009 at 10:06 am |
  37. Terrell

    What is the obsession with these bonuses? It's not important and it's a distraction from serious banking and housing issues.

    All the wailing and gnashing of teeth over these bonuses is little more than populist envy and class warfare.

    March 18, 2009 at 9:48 am |
  38. John, Mission Viejo, CA

    The moderator of this interview failed miserably as did the booth director for leaving Mr. Mack's microphone on.

    March 18, 2009 at 9:37 am |
  39. WC

    Nobody on Wall Street, or any other street is worth a salary and or bonuses of a million dollars a year, period. If you earn it yourself good for you, but these folks on Wall Street are playing poker with other peoples money, and not doing very well.

    March 18, 2009 at 9:34 am |
  40. Matt

    Bonuses of more than a million dollars is obscene in any scenario. For years, corporate execs have received these crazy bonuses even when they drove their company into near bankruptcy. There's no excuse. It's simple greed.

    And no one in the industry wants to stand up to it because they all benefit from it. It's Corporate America's version of pork barrel spending.

    And apparently Congress did not "miss an opportunity" to restrict these bonuses in the AIG bailout, but rather, someone intentionally added a clause to the appropriation that allowed these bonuses the go through. That's not a mistake, it was an intentional act and we deserve to know who did it. If Dodd didn't put it in there, who did?

    March 18, 2009 at 9:14 am |
  41. Marty

    Ms. Schlesinger:
    I read your response regarding your TV interview. I am sorry to say I missed it.
    Based upon what I have read, there was no stipulation as to the rewarding of employees in the stimulus bill passed by Congress. Some may call it an oversight. I think that it was intentionally inserted.
    Senator Christopher Dodd in an interview stated that he did not know how the bonus exception was inserted in the stimulus bill. If you believe that then you have a major problem.
    Now that the public has been made aware of the bonuses given by AIG to some of its employees and the uproar that followed , our wonderful members of congress have decided to join the parade. Not because they want to, but because they are being forced to and are now looking for ways to retreive the money. It is the normal Congressional mentality of lets react to instead acting to prevent these problems.
    If there is governmental action at any level to retreive this money, you can bet AIG will go to court and probably win. They were not legally prohibited from doing what they did.
    Morally though, they were completely wrong

    March 18, 2009 at 8:51 am |
  42. rex

    The only thing complicated about this issue is the flim flam used to try and make it look complicated. AIG sold insurance and can't pay its obligations under its policies. That is a scam. The churning of financial paper which has no real value when it lands. Getting paid very well because you can keep financial papers churning and not landing. These are also uncomplicatedly scams. The interview was rude but your comments are smoke and mirrors. AIG should sell off its varried business and pays its oblications, their financial dealers would deserve a fair payment for accomplishing that.

    March 18, 2009 at 8:47 am |
  43. Jer

    I am so glad you were given this chance to post here. I thought the 'conversation' on air was poorly moderated and allowed to become something that it shouldn't have. There is a time and place for that, but your purpose was to bring information. I appreciated your above explanation of the compensation structure, though I would like to know more about what performance issues are being rewarded. If people are doing their job, then company performance should be reflecting that, even in a disastrous economy. We all know that a company can do a good job, but be pulled down by a bum economy, but there should still be some measurement that the 'bonus' is tied to. Examples of that seem to remain elusive.

    March 18, 2009 at 8:42 am |
  44. teresa

    Its funny at all of the people that got money from AIG for reelection which includes MR BARNEY FRANK,MR OBAMA,MRS CLINTON,AND MR BUSH. And now AFTER they get there bonus everybody acts mad.I don't know just does'nt sound right

    March 18, 2009 at 8:36 am |
  45. Allan Horn - St. Petersburg, FL

    Would someone please explain to me why many of the very same people who are outraged by the Obama administration letting a tiny 3.9% tax cut on millionaires EXPIRE, and at the same time be so angered by ridiculously excessive executive compensation on Wall Street?

    You would think the 3.9% increase in taxes on people making income like the AIG executives, stockbrokers, and athletes would seem pretty trivial when widows, single mothers, soldiers, cops, teachers and firefighters are losing their homes to foreclosure because some slick mortgage broker talked them into an ill-advised ARM loan!

    In the advertising world, we are taught to gear our ads to a 6th Grade education in this country, yet the general public is supposed to understand all of the intricacies of mortgage lending and real estate valuation???

    Give me a break!

    March 18, 2009 at 8:33 am |
  46. Akinola

    Ms Schlesinger is out of touch with the reality. AIG executives that received bonuses for dismal performances should be made to vomit the money without delay.

    March 18, 2009 at 8:26 am |
  47. Richard

    I was just fired from a job by a group of multi-millionaires, because I informed State Safety inspectors of issues hazardous to children at the facility, who have taken gratuities due to minimum wage employees for their own use, refused to pay back pay due, commited insurance fraud, visa fraud, manipulated deposition testimony and run a company into the ground to devalue it to buy out a partner involved in a law suit... They spend hundreds of thousands of dollars on lawyers, while the company tanks... on top of that their comment if it fails is regarding creditors is... we're a LLC and live 5000 miles away what are they going to do... I have a CEPA claim... but no money for a lawyer and they will probably fold before a court could hear the case... the business community has been set up by lawyers so investors can open business's and never have to pay for their debts and walk with all the money made on the backs of the employees... something is not right with this picture...

    March 18, 2009 at 8:19 am |
  48. T.J. Dennis

    I thought it was only acceptable for the weather forecasters to get paid for being wrong.

    March 18, 2009 at 8:04 am |
  49. Darin K

    Has anyone asked if any of the AIG bonus contracts have "gross-up" provisions? Sometimes the company will "gross-up" the bonus to account for taxes owed on the bonus. If that is the case with any of the AIG executives, a 90% or higher tax to recoup the monies will have no effect.

    March 18, 2009 at 7:36 am |
  50. TED

    I understand (and share) everyone's outrage but the amount of these bonuses is only a small percentage of the BILLIONS of dollars AIG has received. Getting that "small" amount back is not going to help. (They would just pay it back with taxpayer's money they received from the government anyway.) I have a better idea. Let's refuse to give them the next $30 BILLION "stimulus" payment! Maybe that will get their attention!!!

    March 18, 2009 at 7:31 am |
  51. Craig

    How do I get one of these jobs?

    March 18, 2009 at 6:59 am |
  52. Bob

    Finally some common sense on the subject. I find it amusing to witness the indignation of Congress on this subject. It the first evidence of any bi-partisan efforts I've seen yet. And to think it is being displayed by the very people who put in the provision allowing these payments. Interestingly, a provision none of them will now own up to.

    March 18, 2009 at 6:36 am |
  53. DP

    "The AIG $165 million represents legacy “bonuses” that the company was contractually obligated to pay."
    "We cannot attract and retain the best and brightest talent to lead and staff the AIG businesses ... if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,"

    Best and brightest? Most of the $165 million is going to execs in AIG Financial Products, the very division responsible for the practices and decisions that brought the company to its present beggar status.
    So if these bonuses were not paid, the execs could sue–not to mention leave, taking their brilliant business acumen with them–oh, wait, many are leaving anyway.

    The assumption, of course, is that they would win such lawsuits. Let me guess: can all the ordinary Americans who have lost money due to these guys bright decision-making sue and expect to win? Thought so. I would say, let the execs sue, and at such time as the company becomes solvent without aid from the taxpayer and is making a large enough profit, then let the execs be paid their bonuses.

    Or, a judge could simply and legally rule that the bonuses are what they are: unconscionable, and thereby nullify the contractual obligation. Wonder how that would sit with Ms. Schlesinger.

    March 18, 2009 at 6:04 am |
  54. John Barnicle

    I'm not sure you illuminated the situation any better than I had understood in the first place. I think the argument that most taxpayers would make would be "What would be the compensation package if we had let AIG fail?" I find it a bit despicable that as people are making sacrifices to get by in these trying times, that these top executives are doing no such thing – more than several have taken their bonuses and split.

    I still find this bonus situation is indefendable.

    March 18, 2009 at 3:33 am |
  55. cat

    Can a law be implemented (if not already in effect) forcing AIG to return these taxpayer-paid bonuses back to the US government?

    These multi-$million bonuses just COULDN'T have been part of the "contract" that sent hard-earned taxpayer dollars to AIG as a "bail-out or bellie-up" deal!

    Make them return every penny to the US treasury to be put to better use!!! Why isn't that an option?? Just an idea.... Isn't there a law against this type of misappropriation of funds??? WOW....

    March 18, 2009 at 2:37 am |
  56. Cheryl in Washington State

    I keep hearing that companies are paying fat salaries and bonuses to ensure top executives don't leave. Let them leave. Let them join all the unemployed and see if they can find a new job. More than likely their past fat salary will make them 'over-qualified.' Nobody seems to recognize the fact that these people did not intend to leave for greener pastures because there aren't many when you are making over 100K and getting fat bonuses to boot. I know what would happen if I went to my employer expecting a 'bonus or I'll leave' – they would show me the door.

    Frustrated in the other Washington

    March 18, 2009 at 2:17 am |
  57. Pam

    Can the administration structure the loans / bailouts so that such absurdities as bonuses cannot occur. What is quite incredible is that it is happening over and over. It no longer appears as if these are unwitting mistakes. They just cannot be. So what is going on?

    March 18, 2009 at 12:49 am |
  58. Nick

    Hi Jill. Thank you for posing your comment. I really wanted to hear what you were going to say. I was so annoyed by the other guest.

    March 17, 2009 at 10:09 pm |
  59. Ric

    Have these guys never heard of a clause that allows bonus contractes to be changed without any recourse to the bonusee?
    And tieing the bonus amount to actual performance numbers?
    Who's writing thiese bonuses? The bonusees it seems!

    March 17, 2009 at 9:51 pm |
  60. Craig

    Well stated Ms. Schlesinger, but no matter what way you state it, if it walks like a duck, quacks like a duck, and sheds water like a duck, it must be a duck. Whether you call it a bonus, or retention it still comes up the same.
    I have no problem with a company sharing its profits with its employee's for doing a job "above and beyond." What I have a problem with is, first we are "retaining" the same people that got the company into it's trouble in the first place. Where is the logic in that? Secondly, why would any company or board of directors negotiate a bonus of 100% of the previous years bonus, when the financial downward spiral had already begun. I am referring to the contract that AIG entered into in March of 2008 with the financial service group that eventually led to the downfall of AIG and it's need for TARP or what ever you want to call it.
    Whether the government saw it or not, or if the bankers and lenders were caught up in the housing boom, (which was already in melt down at that time) or boards of directors rubber stamping bonus payments; whom ever you want to point your finger towards makes no difference. AIG should have provided that information to the government when they presented their case for the TARP. Or did they conveniently forget that part?
    The whole point is why would any company make such a ridiculous contract knowing that the economy was turning downward, and it's own estimates were pointing towards a less that profitable year from the previous year.
    Why would any company want to retain those who contributed to their financial crisis? Let alone 11 employees who are no longer with the company! (Where is the retention in that picture?) Must be a bonus after all! Gee I wished my company would do that for me, pay me a bonus after I've left!
    I have to agree with some of the proposals that congress is throwing out right now. Targeting AIG directly may create a stir, but a blanket 60% surtax on bonuses would be a good thing for all executives that receive these huge and unnecessary compensation packages. And I would include stock options as well. Many of these executives receive stock options to purchase company stock at a lower price than current market price, and then turn around and sell it for profit. Sure they get taxed on the profit, but I would make certain that the difference in price was taxed as well, after all isn't it an indirect pay or compensation? When you consider the difference of a company stock for the current trading price and the option price could be as much as 50% or more, and given that some of those stocks trade at better than $30.00 a share or more, and some of these executives buy thousands of shares at a time, that is quite a little amount of pocket change! Oh by the way I hope congress also includes some of those "severance packages" as well in the 60% surtax thought process! Paying a CEO $11 million to leave is quite a bit of pocket change to be walking around with!
    So call it retention, or bonus, makes no matter, but if those are the best and brightest, then we need to look under another rock for more bright and best, who could possibly clean up the mess!

    March 17, 2009 at 9:06 pm |
  61. Stephanie

    I saw the two of you sparring yesterday as well when Kiran was interviewing you, Ms. Schlesinger. I understand that you are explaining the Wall Street culture and pay structure over the past 50 years, but it still does not make it right with what is happening right now. There's no way in hell that I will agree to allowing these people to receive their "bonus" for pretty much helping to screw up the economy and millions of people's lives. As Kiran said, don't call it a bonus. A bonus is for meeting and/or exceeding goals. Unless their goal was to bankrupt their company and millions of people, they don't deserve a bonus, PERIOD.

    All companies have their high level executives sign contracts. I can't imagine that there isn't something in the contracts at AIG stating that they could be fired for doing something that was against policy, damaging to the company, etc. We, as shareholders now, should also have a say as to who's hired and who's fired.

    Yes, the culture is changing and it started about six months ago. AIG needs to get with the program and the Government, both the White House and Congress can't "assume" that the money that is being given out to these companies will be used appropriately to "do the right thing". They haven't in the past and there's no incentive for them to do it now. We need lots of strings attached and if that doesn't work, perhaps a temporary takeover or permanent breakup to protect OUR investment.

    March 17, 2009 at 8:56 pm |
  62. Doug

    What she writes is a rationale typical of management, i.e. management gets the bulk of the glory and the wealth, but problems and failures somehow become equally shared. 🙁

    March 17, 2009 at 8:24 pm |
  63. Napoleon

    I too was angered by the bonus news at AIG. However, I just can't believe many of the reactions from those living in a democratic capitalistic society where rule of law greases the wheels for free enterprise.

    Here we have enterprising individuals who have worked hard through their lives to get the most out of life – and while some have stepped over the line of integrity – others have lived by the rules. We have painted everyone with a broad brush and we have judged without assuming innocence first. And the irony of the reaction is akin to what one might expect in China or Cuba – a totalitarian response to a capitalist issue in the USA? Interesting times brings out interesting responses....

    March 17, 2009 at 8:12 pm |
  64. Randall Arnold

    "One key point – how much of a bonus would they have received if there wasn’t a taxpayer backed bailout and AIG went bankrupt?"

    ...and Jim K of NYC sums the whole bag of nonsense up nicely in one clear question. Well done.

    March 17, 2009 at 7:13 pm |
  65. Jimmy

    Blame Bush and Obama and whoever else was involved in giving the money to AIG without restrictions. Its not AIG's fault the government gave them billions and did not specify where the money went. Also if these bonuses were part of contracts then I see nothing wrong with it. And from what I heard AIG's problem revolves around one particular part of thier business dealing with the swaps and the arms. If these people were leading profitable divisions, once again there is no problem in my book. Why do all of you think banks that are profitable are falling over themselves to give back money to the gov? Because they know that if they keep it they will be at the behest of Obama and Geitner and will have to accept the grandstanding from these coward politicians who decided they want to change the rules in the middle of the game. Sounds pretty nefarious to me. All you people with rage against these large companies are falling victim to the Obama thought of "White rich guys are the evil ones and those who want to blow us up arent that bad."

    March 17, 2009 at 6:54 pm |
  66. Mike

    Good Point. Many of the employees that were not responsible for the bad decisions of wall street should not be punished. They have been punished just by their company stock being wiped out, and seeing their saving drop with the market as well. They too are citizens and taxpayers as well and support families just as many here who have commented. It shocked me to see crowds of people screaming and attacking workers getting on buses as they left work for home. They should have been protesting at the ones getting into the limos.

    The reality in America is there are people who make certain wages, some more than others because of the educational background as well as the risks that they take.WE ARE TAKING THE " ITAL" OUT OF CAPITALISM PEOPLE!

    If you want to really see outrage, why did congress just approve a 4 % payraise for themselves! They were just as if not more responsible for this mess by turning a blind eye. Perhaps they should limit there pay as a symbolic gesture to $1 per year until the economy is fixed or the national debt is paid off. Talk about the squandering of trillions and trillions of dollars. I dont see any reporting on this issue.

    What do we do with all the people that ran up there own personal debt to get us into this situation. Throw them in the street.PEOPLE>>>WAKE UP! We have to get over the anger and work together to solve the gigantic problem at hand and not step over dollars to pick up pennies. Demand an end to political posturing. Demand and end to boards of directors that are asleep at the wheel. Its easier now . their stock is cheap . Buy a ton of it and vote them out. More so...hold the regulators and the politicians responsible an demand they stop their negative posturing as well.

    March 17, 2009 at 6:49 pm |
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