An interesting contract in reporting today. Reader (Tom C) sent me the Wall Street Journal version of this story, by Michael R. Crittenden and Liam Pleven, titled “AIG Execs Returned Only $19M Of $45M In Pledged Repayments.” I decided to look at Bloomberg as well, as found one on the same subject, “AIG Should Trim $198 Million in Awards, Feinberg Says,” by Hugh Son. But the Journal has now fallen in line with Bloomberg and has a similar finger-shaking-at-government-interference headline, “U.S. Wants AIG Retention Pay Cut.”
Now look at the difference in emphasis via the headlines. The first highlights that AIG did not live up to its promise to return bonuses, while the Bloomberg version puts the focus on the presumed interference of the pay master, Kenneth Feinberg. But even the Bloomberg version contains a doozy:
American International Group Inc., the insurer that gave bonuses to the derivatives staff blamed for its near-collapse, was advised by the Obama administration to reduce a pending $198 million payment to the employees.
The order from Kenneth Feinberg, President Barack Obama’s special master on compensation, was revealed today in a report by Neil Barofsky, special inspector for the Troubled Asset Relief Program. Feinberg didn’t specify how much the payments for New York-based AIG should be reduced, Barofsky said.
AIG sparked a national furor in March after awarding about $165 million to employees in the unit that sold credit-default swaps. Obama called the bonuses an “outrage.” The bailed-out insurer has said the pay is needed to keep staff unwinding the derivatives. Payments included $7,700 to a kitchen assistant and $87,500 for an administrative assistant, according to the report.
“It is unclear whether Federal Reserve Bank of New York officials knew that thousands of dollars in payments would go to non-essential AIG Financial Products support employees, such as the kitchen and mailroom assistants,” Barofsky’s report said.
In the waning days of the Bush Administration, AIG kept brazenly enlarging the number of recipients of retention bonuses. At one point, it added 2700, who received much lower amounts on average than earlier recipients. I speculated at the time that this was done for the sole purpose of lowering the average amount received to make it less offensive.
The Wall Street Journal story focuses, as the headline suggests, on the proposed bonus cut, without giving the reason why (aside from suggesting the reasons were political, as opposed to AIG is a ward fo the state and should be treated as such):
The U.S. Treasury is pressing American International Group Inc. to reduce $198 million in scheduled retention payments as company and government officials continue to wrangle over pay packages that set off a political firestorm earlier this year.
A report from the special inspector general for the government’s $700 billion financial rescue plan said the Obama administration’s pay czar has informed AIG management that the retention payments for AIG’s financial products division should be reduced. Kenneth Feinberg, Treasury’s special master for executive compensation, has not indicated to AIG management what figure would be acceptable, according to a copy of the report obtained by The Wall Street Journal.
AIG management has previously said it would try to reduce the pending payments by “at least” 30%.
The Journal does include this tidbit:
The report by Special Inspector General Neil Barofsky found that only $19 million, or less than half, of the $45 million in pledged repayments had been received by the end of August. Company officials told investigators that receiving the additional $26 million could hinge on how Feinberg and AIG negotiate the second set of repayments.
But the story only gets to how widespread the supposed “retention” bonsuses were towards the end. Recall that the rationale was to keep employees with essential expertise from leaving. Yet the story, remarkably, tries to pass off clearly unwarranted payments as no big deal because the amounts were small:
The report also provides new details on the range of retention payments handed out to employees at AIG’s financial products division. Individual payouts from the $168 million handed out in March ranged from $700 for a file administrator to more than $4 million for one executive vice president, investigators found. Approximately 62% of employees in the financial products division received a retention award of more than $100,000, though some employees — such as a kitchen assistant who received $7,700 — received much less.
Clearly, if staff who were OBVIOUSLY not mission critical got bonuses, it suggests that managers and higher ups who were similarly dispensable were also paid unjustified retention bonuses.