For a $170bn investment … wouldn’t you check the contract?
Tuesday, March 17th, 2009I’m finding this story about the insurance giant AIG and its bonus payments hard to believe. It’s similar to the Sir Fred Goodwin pay scandal only bigger and more puzzling. For most of us it is astounding how such bonus payments can be ‘guaranteed’, but i’m especially concerned about the lack of care shown by government investors.
The facts of the matter are:
1. AIG makes some stupendously stupid better on the credit markets, using its once great credit rating to take on huge risks.
2. Falling markets and huge derivative losses make AIG totally bust. Bankrupt, not just slightly into the red.
3. US government agrees to bail out AIG, because the alternative seemed to be global financial meltdown.
4. Even though every man, woman and child in America is in effect investing $600 into AIG, no-one bothers to check the employment contracts…
My question is, if it was your $600 (let alone $170bn) going to save the world wouldn’t you want to make sure that no-one was profiting from this kind of failure? For professional investors this is just the most obvious thing to check – that the management team isn’t taking all the cream.
And it looks like the UK government repeated the mistake with RBS. Just what is so tricky about inserting a clause saying that due to ‘change of ownership’ the bonuses will all be cut?? It’s not as if they’re all going to leave to become teachers…
While we’re on the subject, I can assure you that there are no rewards for failure at Teachable. As Managing Director I won’t be taking a salary (let alone bonus) until we are established as the most useful download site for teachers. If we get it right, and everyone benefits, then I will certainly get paid… but then there is no way I can mess up like those boys from AIG.


Teachable will be going to the 


