A reader writes:
I just read the actual AIG FP bonus contract, which was posted on the NY Times website. Two things jumped out at me. One is that it's not a "bonus" contract at all. It's an "Employee Retention Plan." In other words, it's not meant to be structured as a reward for performance. It's more like just another part of the employee's salary package. To me it's a lot less upsetting if the payout is part of a standard pay/benefits package than if it was meant as an actual reward to reflect on the performance of the company.
The other thing that strikes me as very strange, though, is the self-stated rationale of the Retention Plan. According to the recitals section, the contract exists, among other things:
To recognize the uncertainty that the unrealized market valuation losses in AIG-FP's super senior credit derivative and originally-rated AAA cash CDO portfolios have created for AIG-FP's employees and consultants.
I'm not an accountant or a lawyer, but the way I read that is that, as of the December 2007 effective date of the contract, AIG was already aware that their CDOs and market cap were diving or preparing to take a dive, and this was a way of offsetting those losses for the very employees responsible for those failures.
I've been around the block a few times, and have participated in a fair few bonus and retention programs myself, but I've NEVER worked anywhere ballsy enough to say "Hey, you're efforts are destroying this company, in fact we expect the company to go down in the next year or two, so here's some money to ensure that you stick around for the fun." I mean, this is why the letters W, T, and F were invented.
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