zoinks! is bonusgate not what it appears to be?

I was going to write about design theory, or maybe the spiffy new Tata Nano car, but this news item caught my attention. It’s a resignation letter written by an AIG executive to CEO Edward "Piñata" Liddy, explaining the reasons for leaving the Financial Products division. A few choice snippets:
I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.
You can read the entire letter here.

That the letter was published in the New York Times Op-Ed section raises questions as to motivation and sincerity. Is this a self-serving attempt to come out rosy while everyone else enjoys a little inquisitorial heat? (Mmm-mmm. Finance executive flambé!) Or is this really what it purports to be, an inside view? Either way, while I’m as furious as everyone at AIG and Bonusgate, I have to wonder if righteous anger isn’t creating a witch hunt. If Jake DeSantis is correct, some of these bonuses had nothing to do with AIG self-inflicted wounds and failing to honour the contracts is unfair. But here’s another question: since de Santis agreed to work for $1 salary, does it mean that he and other executives are deserving of these bonuses for the work they’ve done (not involving credit default swaps, so he says), or should they suck that up too?

Maybe we need to be more surgical with our outrage given all the flak out there. Not only do we, the little people, not know what’s really going on, we have to swim through several mucky layers of media and government to get even an inkling of the big picture. We need a draconian culling of Big Finance and maybe even a small dose of – gasp! – socialism to restore some semblance of sanity.( Of course, that’s not my ideal vision, but one has to deal with reality. That’s what separates us from Republicans.) In the end, though, I think we need to open our eyes wider and try to see through the haze…objects in mirror may be smaller, larger, or stranger than they appear.


Nick said...

I've of course heard of the bounus thing going on over there in the US, though it's a big hazy as to what exactly is going on. Personally I wouldn't trust a CEO letter, they're just as bad as politicians when it comes to BS. Here in Australia the government has changed the law regarding CEO bonuses by leaving it up to the shareholders if they feel the CEO deserves the bonus or not if it exceeds a certain amount. (I can't remember the exact clause) but I think it's a step in a the right direction. Making the CEO accountable for his bounus or golden handshake. I like it, I really do. Maybe the US should look into that.

Frederik Sisa said...

Well, the letter isn't from a CEO but TO a CEO from a ranking executive. In any case, I certainly agree that there should be a stronger oversight of when CEOs and other executives get a bonus. It's just an outrage to see people who failed so obviously nonetheless take away millions of dollars.