AIG $165 Million Bonuses Force Consumers and Lawmakers to Take Stock

After Bloomberg reported that AIG handed out $165 million in the form of bonuses today to its employees and executives, outrage was expressed about the misuse of the taxpayer funds that were handed to the company just six months ago. Even though AIG is contractually obligated to pay the bonuses, the move is not helping the company's goodwill stock with American consumers or government officials.

AIG executives, though, can't really be "abusing the system," as House Financial Services Committee head, Barney Frank accused them of doing on ABC's "This Week" program. AIG executives are the system.

Unfortunately, AIG leaders aren't doing anything radically different from what senior level executives in many other publicly traded U.S. companies are doing. So, if there is any abuse going on, it's within the structure of "the system" itself. The real issue is, why are American consumers just now noticing it?

A look at the retail industry CEO compensation list for 2008, for example, reveals that AIG's executives are not asking for anything that many retail executives haven't already received.

Net losses at Ann Taylor were $334 million in 2008, and its stock lost 79% of its value. The entire company only made $2.9 million in net income for the entire year. CEO Kay Krill was awarded more than double that. According to Salary.com Krill received compensation valued at $6.8 million in 2008.

Regional department store chain, Gottschalks filed for Chapter 11 protection on January 14, 2009. On February 24, a federal bankruptcy trustee objected to the $500,000 the company requested for bonuses to CEO, James Famalette, and COO, Greg Ambro. Reportedly, the bonuses were requested to compensate the two for the "extraordinary efforts" they would expend in leading the company through bankruptcy.

Leading an organization to an 8.8% decrease in same store sales, a 95% decline in stock value, a delisting from the New York Stock Exchange, and running up $28.2 million in debt is extraordinary, indeed, for one short fiscal year. Personally, I just never thought of those types of accomplishments as bonus-worthy.

At least someone stood up in court and objected to the Gottschalk bonuses, right? Nine days later... more...