No Runny Eggs

As I head for a week of being incommunicado, I’m going to lay my blogging neck on the line with a topic that has a lot of emotion attached to it. I’ll give you 10 days to tee off on this and we’ll see if Steve will have changed the locks while I’m gone;

We had a spirited debate during the debate livedrunkblog about the disclosure in the Congressional hearings that AIG spent approximately $400K for a trip, a week after they received $85 billion in government loans to avoid their failure.

The trip has been described in most media similar to this from the Washington Post:

And just last week, about 70 of the company’s top performers were rewarded with a week-long stay at the luxury St. Regis Resort in Monarch Beach, Calif., where they ran up a tab of $440,000.

Other reports refer to the trip as “An Executive Retreat.”

That sure sounds bad doesn’t it? Sounds like the company is just carrying on like a college student spending their parent’s money without regard for the effort to earn it.

It’s not.

Here is the description from AIG:

The event, mischaracterized as an “Executive Retreat,” was held by one of AIG’s insurance subsidiaries for independent life insurance agents, not for AIG employees. These agents were top business producers for the company, and of the more than 100 attendees, only 10 were employees of the AIG subsidiary who were there to represent their company. No AIG executives from headquarters attended. The meeting was planned months before the Federal Reserve Bank of New York’s loan to AIG.

So what’s the difference?

First, the retreat was not for AIG executives. The retreat was a recognition trip for their top (and this next word is really important) Independent agents. Independent agents are just that…Independent. They get to chose what insurance products they sell. There are many ways to provide incentive for sales people to sell your products, compensation is one, contests are another. However, from my experience, incentive trips are a huge deal for many sales people. The ego boost of the “top achiever” recognition can do as much or more than any other temporary incentive programs to build sales loyalty and spur agents to higher sales achievement.

Second, while there were some AIG executives there, that would be expected. When you have a recognition trip for agents you will typically have the people responsible for managing those people and programs, at the event to emcee, be hosts and build comraderie with the agents.

Third, these were Independent agents. Independent agents generally represent insurance products of multiple companies. If AIG wants to make sure that the agents continue to sell their products (an important thing if we want the company to survive and actually pay back their loans), it’s important to keep the agent’s “head in the game.” Cancelling a recognition trip that they had worked for all year, because of your financial problems (not theirs) does not garner confidence amongst your most valued and highest producing agents.

Fourth, unlike the notion you get from most of the articles that AIG got their money and then booked a spa get away, this program had been in place for some extended time. It’s not unusual for these types of programs  to be  announced a year in advance so that the efforts of that year are what earn you a ticket to the event.

Finally, yes, loaning them $85 billion (and I heard another $35 billion tonight) is a lot of money. However, implicit in the fact that it is a loan and not a complete takeover, is that the intent is for the company to survive…likely smaller, simpler but still survive. At the end of June, AIG had assets of $1.50 trillion dollars.   If that is the intent, AIG will need to continue to execute and grow their non investment business lines.   If you’re concerned about this expenditure, would you like to adjust the commissions they pay?   Would you like to look into   their office supply expense?

My point is this:

Was it the best move?   In hind sight, maybe not.   But please note I said “hind sight.”   However I will maintain that it wasn’t the “let’s spend Dad’s money trip” that it’s been made out to be.   Additionally, like so many other events that have occurred during these difficult times, the press and others have condemned others, without getting facts, while failing to admit their own failures that contributed to the failure of many of these companies.

The problem I see in this environment is that many smart, well intentioned people are getting caught seeing a boogieman behind every action that any of these government assisted companies make.   Are there crooks out there?   Yup, no doubt some of these folks ought to be put in jail.   However, most of the people in companies like AIG, a company that employees 110,00 and has many more independent agents that work for it, are people like the rest of us, trying to make a living and do a good job.   Most of the people at AIG are not making decisions based with the intention of “how do I screw the taxpayers!”

Still not convinced?   Let me try another way.   $400K is .04% of $85 billion.   In perspective, if you made $50K each year, that would be equivalent to you spending $.25.   If you have a $300,000 mortgage, it would be the equivalent of $1.41.   I know $400K and $85 Billion are really large amounts of money but do you really think that something that is less than the equivalent of a cup of Starbucks should be the focus right now?

Yes, I know it “looks bad.”   Yes, there are bad people out there, no doubt.   However, we need to make sure, especially now when it is very easy to be overwhelmed with negative news, that we have complete facts and we hold individuals, not entire companies to account for their actions.   If not, how much better are we than the people who cry “Buuuuuuuuuush” every time something happens that they don’t like?   We’re smarter than that group.  

We need to make sure to step back, get the facts and  take a deep cleansing breath.   After doing all that, we should pursue every last one of the cheating, lying, scumbags that turned their heads while they feathered their own nests and put us all at risk.   Those individuals need to be rooted out and dealt with with extreme prejudice.   The rest of the folks in AIG and companies like them, are just like us and deserve our prayers and support.