Failed AIG's bonuses to employees draw flak

16 March 2009

US administration and lawmakers have again lambasted insurance giant American International Group's plan to dole out $165 million in bonuses and retention pay to employees.

A major part of this will go to employees in the very business division that wrecked the company's finances. (See: New York attorney general warns AIG over executive bonuses) 

AIG has received $170 billion in tax payers money since being saved from bankruptcy in September. The insurance giant suffered a loss of $61.7 billion for the fourth quarter of last year, the largest corporate loss in history. (See: AIG may report largest ever quarterly loss in corporate history)

"The whole situation at AIG is outrageous. What taxpayers are being forced to do is outrageous," Larry Summers, the president's chief economic adviser, said.
''There are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most outrageous,'' Summers said on CBS's ''Face the Nation'' programme.

But he added: "We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken."

Edward Liddy, the AIG chairman, said he was bound to pay employee's contractual entitlements, but the troubled insurance giant has agreed to administration requests to restrain future payments by at least 30 per cent.