And Another Thing ...
To Edward Liddy: The next time you write to the representative of the janitors, teachers, police officers, and home health aides who now own 80% of your company and are being asked to continue to finance the lifestyles of the people who took it down, try for a different tone. Here, for instance:
“I would not be doing my job if I did not advise you of my grave misgivings about the long-term consequences of the actions we are taking today. [Modifying some bonuses — ed.] On the one hand, all of us at AIG recognize the environment in which we operate and the remonstrations of our President for a more restrained system of compensation for executives. On the other hand, we cannot attract and retain the best and brightest talent to lead and staff the AIG businesses — which are now being operated principally on behalf of the American taxpayers — if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury.”
Mr. Liddy refers to “the environment in which we operate”, as though he were talking about some unfortunate sort of weather. I wonder whether he’d use the same sort of language in other contexts. Suppose, for instance, that he* had shot someone and been sent to jail, and had had to be bailed out by his family, who had had to put all their assets up as collateral. And suppose that somehow or other, those assets kept being forfeited — a car here, a second house there. The family doesn’t like this much. Nerves are raw. Then one fine day it turns out that while Mr. Liddy was somehow not able to pay his own bail, or keep the family’s assets from being forfeited, he did manage to find a half billion dollars to pay off the person who convinced him to shoot his victim in the first place.
If that happened, I bet his family would be pretty angry. And I ask myself: in that situation, would Mr. Liddy say to his family: “I understand the environment in which we are operating?”
I hope not, for his sake. Begging for forgiveness, or at least expressing genuine contrition and an acknowledgement that the problem is not an atmosphere, but things he did*, would be much, much better.
And about that “continued and arbitrary adjustment” of employee compensation: what’s so arbitrary about the idea that when you wreck a very large company, you shouldn’t get a performance bonus? That seems pretty sensible to me.
In the long run, I don’t think that retention will be a problem. Eventually, AIG will be sent back into the private sector. I’m sure that its employees will be able to figure out that while the government takes an interest in their compensation when it is paying their wages, it takes no such interest when it is not. And if, in future, AIG employees look back on the days of government interference with horror, that’s fine with me. It will give them an extra incentive not to torpedo the company.
It is, of course, the short run that’s the problem. But it would be better to be clear about what that problem is. People who by rights should have been fired turn out to have a gun to our collective heads. We supposedly need to be nice to them, or else they’ll go away and let us unwind all those misguided trades that are so complicated that no one else can understand them. Fine. That, I suppose, is the nature of the company that Mr. Liddy has taken over: a company in which failure is not just rewarded, but allowed to become essential.
In his place, though, I wouldn’t go around lecturing people while I was asking them for money.
*Note: Liddy was put in charge of AIG in September, and is to my knowledge not responsible for AIG’s collapse. I have had to make him the villain here because I’m trying to imagine what he’d say in a personal context, and I don’t want to deploy as many characters as I’d need to to make the exact relationships come out right. (The natural thing would be to make AIG the villain, but insurance companies don’t have families.)