Aig Bonus Plan Faces Fiery Criticism

The bonus plans of American International Group are facing fiery criticism

. The company however has said that it will reduce bonuses by $20 million. On 3rd February it was scheduled to disburse $100 billion according to insiders. But these reductions would not be sufficient to silence the critics who are not buying the argument put forth by AIG that it has keep the promises it had made prior to getting help with bailout money from the government.

Senator Charles Grassley (Republican/Iowa) said, "AIG has taxpayers over a barrel. The Obama administration has been outmaneuvered. And the closed-door negotiations just add to the skepticism that the taxpayers will ever get the upper hand."

AIG had made bonus promises so as to keep people interested and working in the unit that traded in derivatives. The latter led to the explosion in September 2008 that was followed by the biggest bailout in the history of America. The contracts had been inked in 2007 December and were done so as to prevent the employees from leaving the firm. It was promised that bonuses would be paid regularly in instalments of approximately $198 million. This is due in the middle of March but was brought forward to bring into effect a plan pertaining to reduction of size of bonuses.

Afraid of an outburst similar to the one that broke out in the previous spring, AIG has been having talks with Kenneth Feinberg, the Special Master for Compensation with the Treasury. The idea is to satisfy both the taxpayers as well as those to whom the promise had been made.

Those who are still working in the unit dealing with financial products have been asked to accept 10% cut backs while those who are no longer with the firm to accept 20% cuts. Those who qualify for bonuses as per previous contractual promises are entitled to it even if they have lost jobs. The financial products unit has laid off 200 personnel while winding down the derivative activities of AIG.

The company has informed all those concerned that if they refuse to accept the reduced bonuses they will not be given anything at all. This information has been got from an insider who knows about the agreement.

Some have not given their consent to the cutbacks and are insisting on the entire share. A good number still in the employment of AIG have accepted the change but only a third of the former employees have given the nod.

by: Julie Thompson

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