Is there a "other side" to this AIG bonus fiasco?

[rufus_4000]

Quote from schreibdave:

Anybody seen a place online where you can find the actual contract language? Or know what % of these people's total salary comes from bonuses?

From the data collected form the articles, it really didn't seem like AIG's pay structure is that different from other wall street firms.

Usually in a wall street firm, you get anywhere from 60-80% of your total income "package" in bonuses. In an average year, it is not unusual for even an associate (MBA with 1-3 yrs of experience), to get around 130-150k in base salary, and 200 - 400k in bonuses. I have seen exceptional associates making >$800k-$1M. For say VPs, the range is from 400k to 1.5M.

Take a new MD that was hired into my investment bank. His deal was "10 over 3", that means 10M guaranteed over 3 years. I would imagine some of the AIG guarantees are in that format.

However, virtually all employment contract I have seen, include so-called "extra-ordinary circumstance clauses", in which the investment bank can effectively eliminate, reduce or delay the bonus payout. But once that "clause" is activated, the i-bank would not be able to recruit talent, I guess.

But in this economy, I know plenty of people who would just be happy to have a job, let along be choosy about it.

This all comes back to crust of the problem. Once the government owns 80% of AIG, AIG's management have "no responsibility" for the fiduciary well-being o the firm, so in other words, "they don't care". I think the government might as well Nationalize AIG. The current setup is the worst possible, the Government have Ownership but no say, in how the firm should be run. This is just an illusion.

 

[Ivanovich]

Quote from rufus_4000:


But in this economy, I know plenty of people who would just be happy to have a job, let along be choosy about it.

EXACTLY.

I work at a pharma company, and if we don't hit our targets, guess what? We don't get a bonus.

 

[fearless9]

Quote from lwlee:

I like, Credit Suisse (?), solution, give them the toxic assets as bonuses. Let them share in the pain.

Yes, I favour that approach as well, for the same reason.

regards
f9

 

[hilojack]

"extra-ordinary circumstance clauses"

Like the company NOT making money? LOL. When I started on the street roughly 15 years ago, the bonus structure was in place but was contingent upon the company being profitable. And mostly it was a foregone conclusion that you would be profitable, otherwise you'd be out of business.

I agree with Rufus, most now SHOULD be happy to still have a job, let alone bonus. As far as retention bonuses go, how many who received a large bonus at AIG are actually going to stay after this backlash. Next to none. People are replaceable on Wall St.-- these masters of the universe are nothing morte than over-priviledged punks with a good line of BS.

 

[nutmeg]

But in this economy, I know plenty of people who would just be happy to have a job, let along be choosy about it.
---------------------------

(sigh) Anyone having any luck breaking a union contract?


On the flip side, there are plenty of foreigners that would be happy to have a job and wil take away jobs from Americans for less money in good times.

The happy to have a job arguement doesn't cut it.

 

[trendlover]

Quote from lwlee:

There were some insanely reckless and greedy people at AIG. To take on such massive size without considering the repercussions, those guys must have been on something.

I like, Credit Suisse (?), solution, give them the toxic assets as bonuses. Let them share in the pain.

If the swap derivitives were traded with no exchange or the clearinghouse, how do people know what dollar value they have? How big were the bets? How do people find out what AIG really owes to the counterpartys?

 

[Martinghoul]

Quote from trendlover:

If the swap derivitives were traded with no exchange or the clearinghouse, how do people know what dollar value they have? How big were the bets? How do people find out what AIG really owes to the counterpartys?

You can ask the mkt (i.e. a few counterparties or a multi-dealer vendor) to reval the positions... The problem is the size of the positions vis-a-vis the (il)liquidity of the mkt, really.

 

[texrex2002]

I still don't understand why people are less mad about sending hundreds of billions to (mostly foreign) banks that were greedy and made bad choices because have "contracts" with AIG (becasue we have to honor the contracts!!) than people are about honoring the contracts made with living, breating people that agreed to trade time effort and health for wages, when they turn out to be greedy and/or make bad decisions.

In the latter case people are seeking legal means to block fulfillment of the contracts, and saying things like "eveything is always negotiable." WTH did they not do or say those things when it came to the contracts with foreign banks (which are thousands of times more material)?????

It's like tolerating someone brutally murdering your sister, but then being mostly outraged about that person then spitting on the body...

Both deserve outrage, but relative to their materiality!

 

[trendlover]

Quote from texrex2002:

I still don't understand why people are less mad about sending hundreds of billions to (mostly foreign) banks that were greedy and made bad choices because have "contracts" with AIG (becasue we have to honor the contracts!!) than people are about honoring the contracts made with living, breating people that agreed to trade time effort and health for wages, when they turn out to be greedy and/or make bad decisions.

In the latter case people are seeking legal means to block fulfillment of the contracts, and saying things like "eveything is always negotiable." WTH did they not do or say those things when it came to the contracts with foreign banks (which are thousands of times more material)?????

It's like tolerating someone brutally murdering your sister, but then being mostly outraged about that person then spitting on the body...









You are saying all the bets should not be paid, and make all the swaps contracts no good for everyone? All bets off?

 

[TGregg]

Quote from Ivanovich:

EXACTLY.

I work at a pharma company, and if we don't hit our targets, guess what? We don't get a bonus.

In finance, it's different. Part of the job offer is a guaranteed bonus. It says right in the offer letter something like "This offer includes a guaranteed bonus of $xxx,xxx to be paid yearly in mm."

And bonuses typically are substantial, high double digit percentages of your base salary.

That's what AIG is claiming, that they are contractually obligated to deliver the bonus. How much of that 160-odd million really is required? I dunno. Should the feds make sure that AIG isn't giving out extra lewt to the dorks that created this mess? Yep. But you can't break contracts.

It's interesting that a lot more people are a lot more upset with a paltry eighth of a billion dollar bonus plan and not griping much about the more expensive bailout plan that is ten thousand times as much money. It's like paying for a cab ride from New York to LA and bitching about a toll fare of $2.