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The AIG Retention Bonus Inquisition
By Frank Monahan
There are some things I would be willing to do for a dollar a year.
Heading up American International Group is not one of them. But for
some reason Edward M. Liddy decided to come out of retirement to run
things over at AIG. As an expert in the field of compensation, I can say
with almost absolute certainty, that the lure was not the one dollar a year
compensation package he accepted. I say this because I know that after
taxes, the net amount of compensation will be well below two quarters
and a dime.
I suspect that his responsibilities as the head of AIG would merit an
exemption under the Fair Labor Standards Act. This means that he is
not, I repeat, not eligible for overtime pay. One of his responsibilities
involves appearing before congressional committees and even
sometimes sub-committees. Assuming I use a 365 day calendar for
computations, a single day’s appearance before such a committee
would earn Mr. Liddy a whopping .0027397260 cents carrying it out to ten
decimal points. To put this into perspective, suppose you took a penny
and smashed it into a thousand pieces. If you took just three of those
tiny pieces to pay Mr. Liddy for the day he will have been overpaid. And
you don’t even want to know what the amount is after taxes. If the
meeting runs long that day, he doesn’t get a red cent extra. As far as I
am concerned though, he may be eligible for some comp time and
come in late the next day so long as he keeps it kind of quiet and doesn’t
broadcast it to the other employees.
There are some things that I would do for .0027397260 cents a day but
appearing before an angry mob of politicians who are foaming at the
mouth is not one of them. And even if you grossed up the amount so I
didn’t have to pay the taxes on it, I wouldn’t do it. In fact, in the spirit of
full disclosure, there are only two outcomes I can visualize if I found
myself in this situation. One scenario involves the reading (in lieu of an
opening statement) of my resignation letter. The other, more likely
scenario, involves being lead out of the room in handcuffs. Suffice it to
say that in the second scenario, I would have employed vocabulary that
would make Ron Blegojevich blush.
For those of you who witnessed Mr. Liddy’s appearance before the angry
mob of elected officials, there is much to admire about his performance.
He remained calm in the face of almost hysterical outrage. He
acknowledged the legitimacy of anger at the way his company has
handled things heretofore, yet stayed on message to return the focus to
the search for real solutions to some very real problems. At the same
time he refused to abandon the human beings that were being
figuratively lynched by politicians. At least I hope it was a figurative
lynching. These guys and gals were so mad they could spit. Let’s just
say there aren’t enough pennies in the world to get me to clean their
microphones after they finished. Mr. Liddy earned my respect as an
earnest and intelligent CEO trying to grapple with an enormous problem
and doing so calmly in the face of almost irrational indignation.
The AIG retention bonus inquisition reveals many things about our
current business and political climate. And it is very ugly. But whatever
else you can say about this chapter in our history, there is at least one
individual who deserves our respect. We know he didn’t earn much else
that day.
© Frank Monahan 2009
By Frank Monahan
There are some things I would be willing to do for a dollar a year.
Heading up American International Group is not one of them. But for
some reason Edward M. Liddy decided to come out of retirement to run
things over at AIG. As an expert in the field of compensation, I can say
with almost absolute certainty, that the lure was not the one dollar a year
compensation package he accepted. I say this because I know that after
taxes, the net amount of compensation will be well below two quarters
and a dime.
I suspect that his responsibilities as the head of AIG would merit an
exemption under the Fair Labor Standards Act. This means that he is
not, I repeat, not eligible for overtime pay. One of his responsibilities
involves appearing before congressional committees and even
sometimes sub-committees. Assuming I use a 365 day calendar for
computations, a single day’s appearance before such a committee
would earn Mr. Liddy a whopping .0027397260 cents carrying it out to ten
decimal points. To put this into perspective, suppose you took a penny
and smashed it into a thousand pieces. If you took just three of those
tiny pieces to pay Mr. Liddy for the day he will have been overpaid. And
you don’t even want to know what the amount is after taxes. If the
meeting runs long that day, he doesn’t get a red cent extra. As far as I
am concerned though, he may be eligible for some comp time and
come in late the next day so long as he keeps it kind of quiet and doesn’t
broadcast it to the other employees.
There are some things that I would do for .0027397260 cents a day but
appearing before an angry mob of politicians who are foaming at the
mouth is not one of them. And even if you grossed up the amount so I
didn’t have to pay the taxes on it, I wouldn’t do it. In fact, in the spirit of
full disclosure, there are only two outcomes I can visualize if I found
myself in this situation. One scenario involves the reading (in lieu of an
opening statement) of my resignation letter. The other, more likely
scenario, involves being lead out of the room in handcuffs. Suffice it to
say that in the second scenario, I would have employed vocabulary that
would make Ron Blegojevich blush.
For those of you who witnessed Mr. Liddy’s appearance before the angry
mob of elected officials, there is much to admire about his performance.
He remained calm in the face of almost hysterical outrage. He
acknowledged the legitimacy of anger at the way his company has
handled things heretofore, yet stayed on message to return the focus to
the search for real solutions to some very real problems. At the same
time he refused to abandon the human beings that were being
figuratively lynched by politicians. At least I hope it was a figurative
lynching. These guys and gals were so mad they could spit. Let’s just
say there aren’t enough pennies in the world to get me to clean their
microphones after they finished. Mr. Liddy earned my respect as an
earnest and intelligent CEO trying to grapple with an enormous problem
and doing so calmly in the face of almost irrational indignation.
The AIG retention bonus inquisition reveals many things about our
current business and political climate. And it is very ugly. But whatever
else you can say about this chapter in our history, there is at least one
individual who deserves our respect. We know he didn’t earn much else
that day.
© Frank Monahan 2009
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