AIG Bonuses: Heads We Win, Tails We Win

The incompetence of executives at AIG’s Financial Products group did not extend to the negotiation of their own bonus contracts:

WSJ: [Liddy’s] testimony also revealed a culture of compensation that was highly favourable to AIG’s financial-products employees — regardless of performance. For instance, the employees were paid bonuses in 2007, whether the unit turned a profit or not. The 2008 bonus plan was also designed to kick in without regard to paper losses. In all, the unit reported losses of more than $40 billion last year.

AIG also disclosed in its 2007 annual report that the year’s compensation for the financial-products employees — which totaled $423 million — “was not affected” by gains or losses on derivatives. For 2007, those derivatives, related to toxic real-estate assets, produced a paper loss of $11.5 billion. Paper losses on such contracts snowballed to $28.6 billion for 2008.

 

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.