Tuesday, March 17, 2009

Wake Up Mr. Liddy ... Kill the Bonuses!

The 'bonus' situation on Wall Street, and more particularly with AIG is beginning to seriously anger American taxpayers, especially since we are the ones who enabled them to remain in business and not go under. It's like a slap in our faces that they hand out unwarranted and outrageous bonuses to poorly performing executives. Must be nice to be able to receive a bonus for unsuccessful performance. Only on Wall Street!

AIG, along with other Wall Street and Banking Corporations, need to fire their Human Resource Compensation staffs and replace them with people who understand how to create equitable compensation and incentive packages. Bonuses should not be payable just because there is a warm butt in a chair on a certain date. Bonuses should be payable only when certain parameters are met that positively impact the bottom-line effectiveness of the firm. Various factors (multipliers) should be assigned and assessed that can have a range of from ZERO to some number (e.g., 0-10%) that when multiplied against base salary determine whether and how much of a bonus is warranted for the performance.

When the bottom line is ZERO or in negative numbers, the performance factor would also be ZERO ... thus yielding ZERO bonus ... since we all should readily understand that ZERO times any number would yield ZERO dollars bonus.

Having worked in Human Resources during my working career, I understand how compensation packages work and fault the HR-Compensation group and the upper executives of AIG for designing such a faulty compensation mechanism that rewards ineffective and destructive performance of not just it's executives, but by extension, all of its employees since those executives will then lead their departments in ways to maximize their own personal compensation package ... at the expense of the health and welfare of the overall firm.

Edward Liddy, AIG's CEO, claims his hands are tied in that the employee contracts require him to pay out these bonuses. Um ... that didn't stop the Auto industry to renegotiate their labor contracts to restrict auto workers' compensation packages! If the taxpayers hadn't stepped in with bail-out money ... I doubt he'd be paying out those bonuses ... or that employees would prevail in bankruptcy court in recouping any bonus compensation. I simply cannot fathom how these executives (toxic assets, themselves), who amassed such toxic assets (loans and other illiquid assets) for a firm that needed to have taxpayers bail them out, could themselves worthy of any form of additional compensation for their outrageously ineffective performance?

Mr. Liddy also claims that if he doesn't pay the bonuses, he'll be "unable to retain talented staff members." Excuse me? Sounds like his staff has a talent he could afford to lose. Not only that, where exactly, in this pitiful economy does he expect that his 'talented' staff is going to go? Has he looked at the number of truly talented people who are currently out there desperately looking for positions and who are eager to do a wonderful job for employers willing to give them a chance to once again bring home enough money to put food on the table and to pay the mortgage?

Apparently the term "toxic assets" no longer describes just bad loans and financial instruments. It now extends to those people on the payroll who created them in the first place. Maybe, just maybe, Mr. Liddy ... you should seriously consider ridding AIG of some of the toxic personnel assets now found in your HR-Compensation group and executive ranks who may be preventing or inhibiting a turn-around in AIG's bottom-line performance!

Related Posts:
AIG Bonuses 'Staggering' in Size (ABC News)

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