Enough about AIG
March 17th, 2009 by Quan Tranh
Right now everyone is having a field day with AIG and their $165M bonus. Well I say suck it up America. First of all those bonuses were contractual obligations. The first thing you learn about business is you honor contracts. If AIG had been allowed to fail and go into bankruptcy then a judge could have wiped out all those contracts, but both the Bush and Obama administration have decided to keep feeding the parasite. That money was destined to go to whomever it did, so no crying about it.
Now the brilliant people on FoxNews are saying that, hey “we” own 80% of them and don’t we get a say? Well, did the Federal Government call a board meeting to say “We’re the new owners and the new policy is no bonuses or stock options until we say so”? No, they didn’t. Though to be slightly fair I bet they didn’t think they needed to call an emergency board meeting to get that point across.
The other dilemma that the people at FoxNews are facing is that the Board has a fiduciary duty to perform. I doubt it would be legal for any Board of Directors of a public company to simply say, we’re not paying our contractual obligations in terms of bonuses or to foreign creditors (German and French banks) that we owe money to because it’s the American people who own this joint now. The new stock holders (the government) should have proactively gone to all of the banks that AIG owes money to in order to get a better rate or defer payment until things stabilize. It’s too late for that now, but Geitner should have a great To Do list.
The other rant I have is about all the Las Vegas parties that the financial industry haven’t canceled. I’m not up to date on Nevada law, but in Georgia you are not entitled to a refund if you pay in advance. If you pay your gym membership up front, you get a form that tells you under state law you have no recourse if the other party fails to perform because you are paying in advance and that the seller will not issue refunds for any reason even if the business closes. You are entering into a 1-year or 2-year contract with payment in full in advance after all. If I’m running a resort and I have some big wall street types, or small business types or a wedding party, wanting to rent the place out, you can sure bet I’m going to stick them with the non-refundable contract under state law. They can either cancel their party and I keep their money, or they can throw the party and I can keep their money. So, don’t be mad at Wall Street for continuing to party. They’re just doing business with ordinary people who have a facility to rent.
Tags: finance
Category: Business |
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