Bonuses Are Minor Part Of AIG Manipulative Greed

In normal times, usually around Christmas and only if the company owners thought it proper, and profitable, they would allow a bonus. How they figured that out was their private arithmetic, the workers just partook in the company’s good fortune and management’s largesse.

It was to the company’s benefit – everybody knew that; it built loyalty and a sense of hard work noticed. But still, most workers didn’t care to intellectualize it very much; a bonus was a reward.

At least that was how a bonus was in the newspaper business and it was, in times not that long ago, much the same in lots of businesses. Workers got a few extra bucks if the year was strong, nothing when business was bad. It was a barometer of sorts.

Of course the workers’ pay – the average person’s working wage – was different.

That was a matter of settled amounts, whether by union contract or non-union wage scales. What one brought home with a salary or wage was a surety. It was written down. And in most instances, everything would be taken care of with the base salary: the rent or mortgage, utilities, food, clothes, education and the like. All those were covered.

That was, after all, why workers had steady jobs. They were rock solid base of income. This was the basis of everything else in the culture. America lived by that dictate.

At least that was the case for working stiffs.

In the world of mega-business, however, the bonus was the carrot that many workers sought; it came to dwarf salaries. It became more than proof of good work or the success of the business itself. The bonus, in the increasingly strange world of Wall Street and big money, became an end unto itself, a tribute to personal achievement that supposedly carried the company along, rather than the company carrying its employees toward mutual success.

So in the increasingly upside down world of Wall Street and big business, companies like American International Group (primarily an insurance business), the AIG bonus was the sacred chalice after which everyone sought in their chase for wealth.

At AIG, people in the Final Products (AIG-FP) division, fourteen managers and roughly 59 salespeople got a deal, by contract, where their last year’s salary became the base for the new year – last year’s bonus included in that total – and new business lured into the AIG fold the next year then counted as new “bonus” money.

This was a profoundly different approach to overall management. The concept itself had been used in boardrooms for some time as a mechanism to push CEO’s to high levels of performance, but now it was pressed outward to the second and third tiers of employees. In a way, it was avarice unbound.

The concept itself was intrinsically unsound, but when applied within the confines of the board room, for a period of time it seemed smart. CEO’s who led their companies to new levels of value, either by swallowing competitors or finding new sources of revenue development, were no longer simply well paid, they became rich. But then, in retrospect not surprisingly, they became more powerful than the board of directors, who were supposed, under normal conditions, to oversee them.

Nothing, however, was normal in recent years. These superstar executive achievers suddenly acquired such a glow of monetary power that in recent years, they were able to name their own board of directors. In short, the boardroom became their sounding board.

Not surprisingly, it was soon decided, especially on Wall Street, that pushing the concept downward to middle-management and beyond could only result in a vast burst of profit. The sometimes downplayed creed of ‘greed is good’ was now unleashed openly.

Yet while this strange concept par-boiled along during the ‘90s, it was restrained by the traditional federal government restrictions and oversight. As a result, it appeared that the concept worked, since profits grew, acquisitions were rampant and competition was being limited but there was no outcry, and of course stock prices were constantly rising.

But then the purveyors of the bonus concept received the ‘manna from Heaven’ that they had long dreamed about. George W. Bush gained the presidency, bringing with him an orthodoxy that was absolute; that is, government regulation is wrong and only unfettered Capitalism can bring true prosperity; the Bush/Cheney Administration even went so far as indicating that freedom itself is tied to the elimination of government oversight. Such a political position is enticing, since it implies government restrictions will be lifted from everyone, providing more freedom.

Of course, it was and is a totally false assertion. Government oversight of the systems that affect average Americans did not, would not and could not change, but federal review of the powerful was suddenly different.

During what can be reasonably declared the Bush/Cheney decade, rules were effectively trashed. During the two administrations of Republican George W. Bush, corporate boards held effective sway over how business was done, who could do business, how much they could plunder and what the standards would be. Rules crumpled. The Federal Trade Commission, FTC, the Securities and Exchange Commission, FEC, along with virtually all other governmental regulatory functions were either shunted aside or filled with appointees whose philosophical and political world view was antagonistic to the very missions they were sworn to uphold.

It was, finally, unrestricted Capitalism, the very concept that the GOP had been preaching for decades! Suddenly either traditional regulatory structures were removed or it became clear the people in charge of the enforcing agencies would be calculatedly looking the other way. It was the final victory of the false assertion of Ronald Reagan and the Republican Party that government was the problem, not the solution.

Of course, this false populism, brought to maturity under George W. Bush, overlooked the hard fact that the central purpose of democratic government in a republic is to protect the majority of the public from depredations by the rich and powerful. At American International Group, that happened so severely that the new Administration of Democrat Barak Obama has had to take AIG under government control. How much it will cost is unknown. Tax dollars devoted to the company are at a current level of some $180 billion.

Breathtaking! With AIG, the car companies and some other major corporations, Obama has been forced, in trying to reverse the effects of the regulation free, cowboy capitalism of George W. Bush, to effectively nationalized some of the nation’s largest companies. He clearly does not want to do this, but there are not enough checks and balances to leave the big firms on their own.

Writing a new set of standards will be a huge undertaking.

It will far outstrip the tiny problem of $165 million in bonus money to a few AIG salespeople and managers. Those do need fixing, of course, but they are piddling problems. And they generate another, much more difficult dilemma, which is how the new managers of AIG and is subsidiaries motivate their salespeople. This is a bigger problem because the new salespeople are the ones that should be expected to draw AIG out of its near collapse and put it back on its collective feet. Americans who have sunk $180 billion into AIG want the company to succeed. It will serve no one to watch AIG fail completely and the nation get hurt along with the company.

AIG’s world-wide sprawl of operations is too enormous for even the best of economic wizards to deal with. Looking for a scape goat, media, politicians and the public pounced on bonuses as the problem. Of course the bonuses were a freckle on a cancerous backside; but it was easier to grasp the injustice of the $165 million bonuses than grapple with the whole $180 billion problem.

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