A Man's Got To Eat, But . . .


I realize that anyone who heads up AIG is going to be a lightning rod for criticism. But apparently the current CEO doesn't realize this:

The American International Group said Tuesday that it had moved ahead with a previously announced compensation package for its new chief executive, Robert H. Benmosche, giving him $7 million in cash and stock, after he reaffirmed his commitment to stay at the bailed-out insurance company.

If I were running a company like this I certainly wouldn't take $7 million in compensation. What planet do these people live on? Are they deaf and dumb?


Sean Paul Kelley November 25, 2009 - 8:53am

is in AIG common stock and that it is not an outright grant. The stock is issued in the executive's name but cannot be sold unless and until the company reaches certain defined financial objectives like returning the company to profitability and repaying the government. I heard Ken Feinberg speak last week on the topic and his view is that there have to be significant incentive rewards to keep top executives on but that the bulk have to be tied to company performance. Here's a link to a report on essentially the same speech. In this context, and given the size and complexity of the task before him, Benmosche's package seems hardly excessive. Good people don't work for peanuts.


“I despise ideologues masquerading as objective journalists.” - Bill O'Reilly, March 30, 2007

Mark November 25, 2009 - 9:14am

Millions of good people work for peanuts. There are 10,000 unemployed derivatives traders and among them probably a thousand with managerial experience. Among this number are certainly many who would take the AIG job in a flash for one-tenth what Benmoshe is getting.

The same is true for Ken Lewis's job. The problem we are dealing with is not one of talent, but one of exclusivity. The CEO market is managed by executive search specialists and executive compensation specialists who control the possible number of candidates based on their notions of who could do the job. The usual starting criterion for high-profile positions is previous CEO experience, so that knocks out all but a few people who have managed to break into a CEO job. The board of directors always defers to these search experts because they themselves don't have the time to conduct the search.

Until we break up this cabal US management practices will never be reformed, especially compensation.

Numerian November 25, 2009 - 9:32am

about the need to manage risk as a key element in returning these companies to profitability. With all due respect, since AIG is a government owned company surviving soley as a consequence of the infusion of our tax dollars, given the history of how AIG got in trouble in the first place, I do not want to see it being run by an unemployed derivatives trader with or without management experience. And if you are trying to sell the concept that CEO experience is different from other types of experience such that one would not logically first look at successful former CEOs to fill such a position, it is a very hard sell.


“I despise ideologues masquerading as objective journalists.” - Bill O'Reilly, March 30, 2007

Mark November 25, 2009 - 9:47am

so successful that they've driven the economy into a ditch and meanwhile the people inside and outside said organizations are ostracized and never listened to. Talk about reinforcing success!

"All men's gains are the fruit of venturing."

-Herodotus

Sean Paul Kelley November 25, 2009 - 10:04am

is not a pool of successful former CEOs to draw from, I must disaggree as that is simply factually inaccurate. Remember that Feinberg's "pay czar" function is limited to seven companies that received government bailouts. Even after accounting for the bankruptcies like Lehman, there remain hundreds of profitable well run public companies with CEOs that can rightfully claim to be successful and would thus form a pool of potential CEO candidates from which another company could draw. If your point is that drawing on talent from within is sometimes superior, I have to agree that is often true, but that does not negate the existence of the pool of talent on the outside.


“I despise ideologues masquerading as objective journalists.” - Bill O'Reilly, March 30, 2007

Mark November 25, 2009 - 10:36am

That actually makes sense. Hank Greenberg knew nothing about derivatives and Joe Cassano could talk him into doing whatever he wanted.

If the purpose is to shut down the trading portfolio in an orderly way at profit if possible, that's not a CEO position. Many of us who have worked on Wall Street have done this a number of times, including with the LTCM book. What you need are talented risk managers who know how to keep the book reasonably hedged every time a contract is abrogated or closed out. Again, there are thousands of people out there who can do that and would love to get $200,000 a year for that job. Then you need someone who can manage these people and understand exactly what they are doing and proposing to do so as to give them approval or not.

It sounds to me more and more that this guy Benmoshe isn't right for the job either, and certainly not at $7 million even if it is all in stock.

Numerian November 25, 2009 - 11:43am

Focusing on AIGFP misses the point. The purpose is way more than to shut down the trading portfolio. Yes, that does need to be done but is is only part of the picture. AIG remains one of the largest insurance groups in the world and needs an experienced CEO to manage those operations. Benmosche, as the highly successful former chairman and CEO of Metlife understands insurance company operations. AIG needs someone like that to maintain the remaining insurance enterprise and make it thrive. Absent an experienced and knowledgeable CEO like that, and they simply do not come cheap, I can't see how there is any hope of reviving the company so we can get our money back.


“I despise ideologues masquerading as objective journalists.” - Bill O'Reilly, March 30, 2007

Mark November 25, 2009 - 8:36pm

nothing wrong with Benmosche. He was retired on the Dalmatian Coast and did not want the job. He came out of retirement based on a deal promised by the government, so they stuck to their agreement.

http://en.wikipedia.org/wiki/Robert_H._Benmosche

http://mauberly.blogspot.com/

mauberly November 25, 2009 - 8:48pm

Are they deaf and dumb?

Considering that, no matter what they do, absolutely nothing has happened to them other than they've become filthy rich as a direct result of their disastrous leadership of AIG, I think they're simply greedy and contemptuous of us, the little people, and our ridiculous sense of effects and consequences.

tehBrynn November 28, 2009 - 7:07pm

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