AIG claims that it promised bonuses to its derivative traders and that it can't break its contracts. Sounds like AIG is using legal formalism to avoid a messy court fight. Contracts, like promises, are often broken when premises change. Financial products brought the firm down; why hasn't AIG informed the people in that unit that if they want their bonuses, they're going to have to sue to get them?
In other words, if the collapse of the company is an insufficient condition on which to base the breaking of a contract, then the contracts themselves aren't worth anything to the company.
What's the worst that could happen? The "bad guys" -- the derivative traders -- would take AIG to court. But forcing the traders to sue for the money they don't deserve turns them into the villians here, as they'd be named plaintiffs. In all likelihood, AIG would, at some point in the future, settle many of these lawsuits, but not until a good number of the plaintiffs were shamed to the point of dropping a chunk of them.
Lets get real here. You want them to sue for what was contractually promised them! Good thing you are a journalist and not a business owner. Talk about bad business practices. If you want to void the contract them let them go through bankruptcy, but as long as the business remains in its current form then the contracts are indeed valid and going to court would just bring the business additional costs.
I haven't seen much (if any at some news reports) about who exactly these bonuses are going to. Salaried executives? Go ahead and shame them. But what about those who work on commission? Some salespeople and traders work entirely on commissions with no base pay, or a very small base pay, and the "bonuses" make up their only take-home pay.
I read the CEO's letter, and it seemed weak, but I'd like to see some more information before I start casting stones.
Despite Liddy's "best and brightest" arguments to Geithner, AIG's bonus compensation program should have been structured to reward exemplary performance that restores solvency and profitability to this ailing company, not excessive risk, poor planning, decision-making and execution. We have already invested $170 billion into AIG (and now own 80% of the company)...Bernanke and Geithner should take it over and rename it what it is: IFG - Insured by the Federal Government.