On the AIG Junket
This certainly doesn’t look good politically, but I think there’s less than meets the eye. The infamous junket involved the life insurance companies, which are doing fine, and not the unregulated entities that were the subject of the bailout. Right now, people working for any company with the letters “A.I.G.” in its name could use some morale boosting, albeit maybe not to such extreme levels.
Politically, though, this was just dumb, matched only in dumbness by Obama’s argument that the execs in question should be fired. Perhaps they should be, but the federal government has nothing to say about that.
[Full disclosure: I work for an insurance company that competes with some AIG companies, but not the ones that were the subject of the bailout, and not the ones that were involved in this junket, either.]
UPDATE: AIG weighs in. Apparently, this was not an executive junket at all, but a sales conference to pamper 100 of their top agents, with only 10 AIG employees (and no HQ employees) even attending. If this is correct, then as far as I’m concerned AIG didn’t do anything wrong here. Shame on Henry Waxman, Barack Obama and the MSM for suggesting otherwise, and shame on me for believing them.
October 9th, 2008 at 10:27 am
According to CNN’s story in Campbell Brown’s program last night about this so-called AIG “junket,” most of those in attendance were independent sales agents (not AIG executives) at what seems to have been their annual sales recognition meeting. It was obvious that the CNN reporter didn’t have a clue what a sales recognition meeting is and the vital role this type of meeting has in motivating a sales force and promoting communication between top executives and their sales people. One should note that even TV networks (perhaps including CNN) have annual sales meetings, and these things do cost money – which is paid back many fold by the sales these meetings motivate.
The concept of the annual sales recognition meeting was invented over 100 years ago by a genius of marketing named John Patterson, then the CEO of NCR (Nat’l Cash Register Co.), and has been adopted by virtually every company with a large sales force. Want to cripple future sales upon which AIG’s future business depends? Then do something really stupid, like outlawing AIG from holding future sales recognition meetings. And by the way, $400,000 is not a big price for a meeting that motivates a sales force to sell billions of dollars worth of product. CNN reporters, and others expressing such uninformed outrage over this story, need to do their homework. They could start by reading Patterson’s biography, “John H. Patterson – Pioneer In Industrial Welfare” by Samuel Crowther, pub. Doubleday, 1924. It’s actually fascinating and highly relevant to today.
October 9th, 2008 at 10:48 am
I thought the government owned 80% of aig. In that case they have a majority of voting rights and 100% of authority to fire anyone.
October 9th, 2008 at 1:23 pm
No. Strictly speaking, the federal government doesn’t own any of AIG. Loosely speaking, the Fed “owns” 80% of AIG but 0% of its insurers. The latter could change, but if it does, wouldn’t we all prefer to inherit a profitable company rather than an unprofitable one?
October 9th, 2008 at 3:06 pm
I never approved of lavish sales conferences at company \expense. If these were individual Insurance agents for an annual conference, let them hold it in a meeting room, pay their hotel and transportation (which. as I have done, is a deductable business expense). The Company does not have to provide more than a lunch, meeting room, printed materials, etc. AIG or no AIG, Bailout or no Bailout, (especially) at times like this Stockholders and Investors need not be responsible for golf games, night clubs, bars,lavish dinners and whatever peripherals go into the six figure tab!!!
October 10th, 2008 at 12:19 am
I’m sure sales recognition meetings are a great motivation for the independent agents, or any other person working in sales at any company…but at my business we tailor budgets for events to the money we have. If the life insurance are fine, i.e. well enough to hold the retreat at a four star resort and drop $23,000 on spa treatments, then perhaps those companies should be bailing out AIG instead of the tax payer. Plus, it doesn’t really matter how many AIG employees were there if they picked up the tab, then it was spending money they don’t have. I realize that this type of retreat is a part of doing business, but it was spectacularly poor timing. When the rest of the country is tightening the belt and looking at the possibility that this bail out could cost us a year of our earnings plus interest, even perceived corporate excess is going to outrage people. Rightfully so.
October 10th, 2008 at 6:54 am
The life insurance companies couldn’t bail out their unregulated affiliates even if they wanted to. The best they can do is use the money they have to remain profitable. If the other AIG can’t pay back the loan, taxpayers may end up owning the insurers, too. If we do, wouldn’t you rather own a bunch of valuable, profit-making insurers than a bunch of worthless ones?
October 10th, 2008 at 2:59 pm
Obama’s comment was not a direct order to “fire” these people. But I think it is a accurate depiction of what most of us want to happen to these mover and shakers who have benefited so well despite their financial misdeeds. And regardless of the intent, design reason for these “junkets” this is not the time. Our motivation for being good sellers, workers at this juncture should be a paycheck at the end of a work week, and we should all be required to forego some of these “perks” in sympathy with those loosing jobs, retirement savings, homes. If you’re lucky enough to have a job that results in “thank you” in ways other than in your salary or commission, then thank you , thank you, thank you. Is that enough
October 10th, 2008 at 4:58 pm
Mara, would you care to elaborate on what “misdeeds” you think were committed by 10 AIG life insurance employees, not to mention 100 top independent agents who don’t work for AIG at all? John McCain took a great deal of heat for suggesting that Chris Cox should be fired, mostly from dimbulbs who thought the President lacked that power. Is it too much to ask for Obama to be held accountable for saying something far more reckless about a private company over which the federal government has almost no jurisdiction at all?
October 12th, 2008 at 6:52 pm
and while you’re at it Mara, how about explaining what you hope to accomplish by having employees forego the ‘perks’ they’ve earned? You do realize that money not spent on perks is retained by the company and not sent off to the people we’re supposed to have sympathy for?