AIG Bonus Payments Controversy - AIG's Response and Counter-responses

AIG's Response and Counter-responses

AIG has defended the bonuses by citing contractual obligations. AIG also claims that only their executives can unwind their complex derivative deals. Rick Newman of US News & World Report argues that this is tantamount to extortion. MSNBC host David Shuster said "The argument that these were so-called retention bonuses is undermined by the fact that 52 of the people who received them have already left the company."

To date, few people outside of AIG itself have defended AIG's payments of the bonuses. Former White House Press Secretary under the George W. Bush administration Dana Perino defended AIG, saying "If they don't get it, maybe they won't be motivated enough to try to help the company turn around." and accusing the "rhetoric in Washington" of "demonizing people". Terence Corcoran, writing in the Financial Post, claims that AIG is innocent, and instead "massive government failure" on the part of Barack Obama, whom Corcoran claims "doesn't get it," is at fault. Evan Newmark of The Wall Street Journal accused those attacking AIG of "hysterical, bloodthirsty ravings" and "populist hurly-burly." Andrew Ross Sorkin of The New York Times argued the case for paying bonuses, saying there was likely some truth to AIG's claim that it needed to retain its top talent, and that its most talented employees could find employment elsewhere. Sorkin also said not paying the bonuses could spark problems across the business community. "If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right," wrote Sorkin. Joshua Zumbrun of Forbes and Eliot Spitzer of Slate argued that the outrage over bonuses distracted from a larger issue: that AIG had taken much of the bailout money and used it to settle contracts with its counterparties, Wall Street banks, hedge funds and non-U.S. banks, at full price.

Conservative political commentator Rush Limbaugh defended AIG, saying "We've got peasants with their pitchforks phoning in death threats at AIG. We have members of the United States Senate and the United States House of Representatives sounding like communist dictators." Limbaugh's comments defended that the bonuses were legal and productive, saying "This money went to American citizens. This money went mostly to American citizens who are registered Democrats. These people who got the bonus are going to spend it. That's called private sector stimulus...The ones who got the bonuses did so on the basis of sales success. These were reported as merit bonuses that they are contractually permitted to get. If you violate their contract, if you don't give them their bonus, you have got a lawsuit on your hands and 80% of this company is now owned by Barney Frank and Chris Dodd and Pelosi, and so they would be sued, the government would be sued by these people."

AIG CEO Edward M. Liddy told Congress that he asked employees who received bonuses over $100,000 to give half back. David Shuster said "That sounded half-assed to members of Congress who were both channeling and deflecting voter outrage."

AIG has pointed out that Connecticut, the state where AIG is based, has a law called the Wage Act. According to the law, employers who don't pay employees the money which they are contractually obligated to pay, could ultimately be required to pay twice that amount.

As of March 23, 2009, 9 of the 10 highest paid AIG executives had agreed to give back their bonuses - and of the 20 highest paid, 15 had agreed to give back their bonuses.