A.I.G. made plenty of headlines this past weekend with the reporting of their $165 million payout in bonuses. That's after the company received $173 billion of taxpayer funded bailout. A.I.G. argues that the bonuses were needed to keep top talent. Let's set aside the argument that salaries are for retention and bonuses are for performance, because right or wrong these employees who received the bonuses agreed to take a salary of only $1. Assume for a minute that this was a valid reason for paying out the bonuses. My question is why was that the only criteria used.
One of the lessons that really stuck with me after reading Snowball: Warren Buffet and the Business of Life was to act as if anything you do or say could appear on the front page of the local newspaper. How would you feel about your friends and family reading what you did? And just for an extra safety margin, assume the reporter to be informed and critical. It's an elegantly simple filter to run decisions through.
Clearly A.I.G. did not effectively consider this criteria, because their decision made it to the front page of the paper and the public is downright angry about it. Perhaps one of the benefits of being "too big to fail" is that you don't need to have much public relations savvy, although I'm guessing it sure could come in handy.
