Less Than Stellar

The economy has been less than stellar lately. Well, duh! You might say.

As this edition of Insurance Journal goes to press, it is days before Thanksgiving, a time to reflect and give thanks for the bounty of life. On the economic front there’s not a lot that we as a nation can collectively feel that great about right now. But of course, life’s bounty has much more to do with family and friends, and health and well-being, than the wild fluctuations (um, downward spiral?) of the stock market that we’ve been experiencing in the past few months. Personally, on that account I have much to be thankful for and I hope you do too.

Still, it’s painful to see a large chunk of one’s life savings go up in smoke in a matter of weeks. The reasons for the current economic crisis are many and they are complicated. And we are not here to lay blame, even if we understood the problems well enough to point fingers at specific people or policies.

But one bit of insurance and economic-related news that came across the wires just days before Thanksgiving made me pause, in a good way. It seems that the top management of American International Group Inc. (AIG) have agreed to: voluntary restrictions on executive compensation that include a $1 salary for Chairman and CEO Edward M. Liddy; no 2008 annual bonuses and no salary increases through 2009 for AIG’s top-seven-officers; and no salary increases through 2009 for the 50 next-highest executives, in addition to other bonus, severance and retention award restrictions.

In the eyes of the U.S. taxpayer, AIG is the insurance industry’s representative “poster child” for all that has gone wrong economically, even though problems at the insurance giant’s holding company brought this corporation to the point where the federal government had to step in with more than $100 billion in loans to save AIG, not the insurance entities.

With millions of homes in foreclosure and hundreds of thousands, if not millions, of jobs being lost across the country, for AIG’s management to now step up now and say that executive pay going forward will be tied to performance is fairly remarkable. These people are not going to suffer economically; they’re still bringing home plenty of money. Even if the agreement was forged mainly for public relations reasons, someone at AIG seems finally to have “gotten it” that there’s no place for exorbitant bonuses and multi-million salaries when the American taxpayer is bailing out your company due to the failures of executive management.

Let’s hope AIG continues to see the light, and that the same beacon will illuminate other corporations that are recipients of federal handouts — as well as those that would like to have a piece of the pie.

That would be stellar.

Topics AIG