An absolute must read if you’ve been following the AIG bonus controversy
Read this letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G. This was an extremely good read and offers a unique perspective on the situation that I have yet to see the media cover before today.
I feel for Mr. DeSantis during this difficult time. I really do. It is a horrible chain of events that has unfortunately put him, his family, his work colleagues, his government, and his American taxpaying citizens all in a stressed position.
However, the misfortunes of Mr. DeSantis is of the same fabric that weaves the carpet that has been pulled out from under my feet as well over the last decade. I am not here to gloat in my own misery, but notice that these misfortunes are now and only now are being recognized in part of the media and congressional mainstream when it begins to affect members of upper management.
Just as Mr. DeSantis was promised an allotment of benefits when his job was complete, I too was promised similar benefits throughout my career and during retirement as an airline pilot. During bankruptcy, my salary was slashed by 60% inflation adjusted. My multi-million dollar pension is gone. My health benefits are less advantageous than in the past and I no longer have lifetime benefits. My days are longer and time off less, thus being away from my family for many more days each month. This was not part of my original obligated contract. This all occurred, as Mr. DeSantis points out, through no fault of my own and while I continued to perform my duties with the utmost professionalism and responsibility.
What Mr. DeSantis is not recognizing, though, is that when companies go bankrupt (or nationalized), contracts are thrown out the window. His rationalization that, “we have worked 12 long months under these contracts and now deserve to be paid as promised” did not hold up for me, so why for him? Why does he get the exception as a member of management?! He goes on to state, “I think [Mr. Liddy's] initial decision to honor the contracts was both ethical and financially astute.” I agree, but welcome to the party, bro! It’s been going on for years! You’re no exception!
I am not here to defend the past compensation packages of my profession. I understand why my benefits are less. Other people are willing to do my job for less, and that’s the game of globalization. My point is that it is now time for upper management to suck it up, realize they too are not worth what they have been paid in the past, stop bitching, and take it like the rest of America has been taking it (and in the same location of the body) for many, many years now.
I am going to 100% defend Mr. DeSantis. This is a prime example of why nationalization is a poor idea and why the bailout stinks. These companies that have been bailed out are now under the scrutiny of the worst possible group of people…the American public. I am sorry to have to say this, but the American public and the majority of their elected officials are, as a whole, stupid. What is being overlooked here is that Mr. DeSantis was told to stay and work and that he would be paid for it. Well things changed, promises were broke, and Mr. DeSantis left. He did not sue and you are fooling yourself if you believe he does not have a right to gripe about not being paid for the work he does.
People in his position do not lead enjoyable lives. Working minimum 12 hour days 7 days a week nearly every day of the year is not enjoyable for anyone…no matter how much you get paid. If he was told he would be paid, and he was not, then he has every right to gripe and every right to leave. And leave he did. Criticizism of Mr. DeSantis is just plain stupid. He is what every working person wants to become. A man who made himself rich by working hard. Who are we to criticize that? This is not some Joe Shmo obviously…this guy is a rare genius with a proven track record of success and profitability. If we allow some ignorant law makers and tax payers to determine the compensation of a person who works twice as hard as the average person in a job that they themselves could never possibly perform, then the fabric of capitalism is at risk. If you are going to tell a company that you have already sunk hundreds of billions of dollars in that you cannot pay your best and brightest employees at least their market value, then you have wasted hundreds of millions of dollars. Why would any employee want to stay at a company where their equity has been exhausted, benefits cut, and compensation slashed when they clearly can go work for a competitor and not have these things happen? The loss of Mr. DeSantis is huge for AIG. I think its safe to say that he is the first of many soon-to-be detractors from AIG…and the more irreplacable talent like him they lose, the more unlikely it becomes that AIG can ever recover. It is more important than ever to have companies like AIG be able to not only retain their top talent, but also attract to talent as well. If we aren’t going to let AIG compete for the best and brightest employees then we might as well have let them go bankrupt rather than pump hundreds of billions of dollars into the company to simply delay the inevitable and waste taxpayer money.
Reading the comments of people who are angry at Mr. DeSantis completley shocks and irritates me. If you don’t like the kind of money people in these jobs get paid because you are not hard-working enough, smart enough, lucky enough, or some combination of the three to have such a prestigous job then that is your problem. I will probably never have such a lucrative job, but I’ll be damned if I’m gonna work my ass off and not even have the possibility of a reward.
You make more money the more irreplaceable you are. That’s just how it works. And if that ever changes, then I am quitting my miserable job on account that I will take less money to be happy driving a cab in Caribbean than work my ass off only to have nothing come of it. This is America people…where we are capitalist for at least the time being.
Michael.
I agree. Big government is bad. Hard, long, diligent work should be rewarded. Capitalism is the absolute best financial system in the entire universe as we know it. Nationalism sucks. Bankruptcy sucks. Our elected officials only work for votes, not for our long-term best interest. Working for something we’re promised and not awarded is betrayal.
I am not angry at Mr. DeSantis as much as I am angry at the double standard. I believe Mr. DeSantis should be awarded his bonus. Let me say that again, I believe Mr. DeSantis should be awarded his bonus. With that said, I also think MY contractual obligation must be upheld. When I entered my industry, my contract stated I was to have a multi-million dollar pension, I was to have nearly twice the salary I have today, I was to have lifetime health benefits, and I was to have more time off to spend with my family. However, I understand WHY that no longer is a reality. My company went bankrupt. Upper management of today can’t quite grip the reality of that yet when it begins to impact their personal lives. It will take time, with much public debate both in the media and in government. ALL employees, both management and labor alike, will share the pain of collapsed financial times with no exception or special treatment of any person or position.
Here’s the thing. Mr. DeSantis brings up the example of being a plumber and then an electrician burns down the building he just newly build and he doesn’t get paid. But if the developer went bankrupt would he have gotten paid?! The answer is no. He performed work, under a contract, with the full faith of being paid under the legislative system we both know as “sound” (we all hope it will remain so). The fact is that something changed. His payer went broke. Bankrupt (or nationalized in our example). Capitalism accounts for bankruptcy, for that’s why it’s in the law. Just like all my benefits got stripped, Mr. DeSantis’s bonus should not be paid. His company went broke. Contractual obligations change. It seems like a sham to have to work all this time and not get paid. I understand (first hand!).
But believe me when I tell you that this happens all over the globe, every day. I have traveled to the far reaches of the earth, spoken with business people all over of the world, and no wonder other countries are angry at us. Our domestic law continually exempts the elite from the hardships of the masses. And this is the understanding and acceptance our American citizens and young, new leaders of the country understand. It is only natural to relate our own experiences to other problems we read. But know that throughout history when the elite are treated unequally from the masses, tensions arise, and hardships that we read only in history books, hardships that we can’t even imagine explode. This is not what we want, and this is all I am stating.
There should not be the double standard of upper management versus anybody else when it comes to contractual obligation. Bankruptcy/Nationalization changes the rules, which should change for every employee. This is not my option, rather this is the law. It sucks that capitalism suffers and inefficiencies arise, but that’s why we account for it in our legislative system. It is reality.
James,
Sorry I should have clarified in my post but I was trying to put coherent thoughts together while extremely busy at work…my last post was completely NOT directed at you whatsoever…it was meant as a response to the comments on I have read on yahoo and NYT. I completely apologize if you felt as if I were attacking you as that was not my intentions whatsoever
That being said while I do agree with just about all of your points, AIG did not go “bankrupt”. Yes, they would have gone bankrupt (clearly) however when the government essentially nationalized them, they did so without many of the stipulations that come with bankruptcy. One of those, to the best of my knowledge, is that contractual obligations were to be upheld. It is pretty clear that the government did not put the necessary restrictions on their bailout money, and its pretty clear to me that the government gave them the bailout money to prevent bankruptcy and all that would entail. If AIG would have been allowed to go bankrupt, then I would have totally agreed about not getting a bonus…thats the way it goes. However a “bankruptcy” was avoided, and thus contractual obligations were to be upheld.
The problem in the first place was a lack of government direction on how stimulus funds should have been spent. It is simply idiotic to give hundreds of billions of dollars to a company with no restrictions…and thats what was done. The whole bailout was horribly orchestrated. The prevention of bankruptcy to me is the key fact here. I could go on for a lot longer but Im still at work and I want to go home
James once again I apologize if you thought I was reacting negatively towards your post. I cannot stress enough that my reaction was based on the ridiculous reader posts on yahoo and the NYT in which they drew upon no facts. Your opinion is obviously well-founded and poingnant and I happen to agree with just about all of it.