Thursday, March 19, 2009

Supply vs. Demand -The AIG misnomer

Why isn't anyone asking the relevant and pertinent question about the AIG bonuses? Why isn't someone asking what the turnover rate is inside of AIG and what the supply of talent there is to fill the open positions if someone was to leave AIG? The answers would likely tell us that there is no reason to provide these bonus payments right now. If you work in the financial industry and you have a job, you are not giving it up easily. As Mayo said in Officer and a Gentlemen: "I got no where else to go!" Our representatives in government show how much they don't know about business when these types of decisions are made. In that backroom with Senator Dodd cutting the deal for one of his largest contributors (excuse me, don't I remember campaign promises saying that the backroom decisions wouldn't happen anymore?) someone should have piped up and said, "What does it matter if someone threatens to leave, there aren't other jobs for them to go to, and if they do, there is so much financial industry talent available that we could pay for the recruiting fees 50X times and still not scratch the surface on the amount of payments for the bonuses". The other thing that I just don't understand is why if these payments were really about retention that they didn't create deferred income bonuses that each of these people would have had to stick around to a defined time in the future to receive. Those are real retention bonuses. Paying someone $1MM now to stay, makes no sense. Even if they created these 6 months ago, it still doesn't make any sense in that the CEO of AIG is talking about the need to keep people long-term. It is times like these that I cringe at the credentials of the people who are our representatives and I am astounded by the lack of their reaching out to those who could help them understand the issues so they can ask the right questions to get the right answers.

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