AIG Bonuses – Ethical or Insane? Business Ethics Speaker Chuck Gallagher Comments…

I want to make this clear – I am pro business!  I think that free enterprise is the life blood of our economic system and I fully support people making lots of aigmoney.  But, I have to question whether the payment of upwards of $165 million in bonuses to AIG employees is ethical or just insane?


The arguement in favor of AIG paying the bonuses is that the contracts that generated the bonuses were established before the economic meltdown and before AIG accepted government bailout money.  Employees who work(ed) for AIG therefore should be entitled to payment under the terms of their contract for services performed.

  • Do you agree?
  • Does the company have an ethical or moral obligation to pay regardless of circumstances?


AIG has accepted, according to published reports, upwards of $170 BILLION of government bailout money.  Sorry for the editoral content, but that is quite amazing by any standard that I could consider.  Nothing like that has happened in my lifetime and I’m over a half century in years.  So – here are some questions to consider:

  • Should AIG be forced to void pre-existing employment and bonus contracts if they accept government bailout money?
  • Should bonuses be paid?
  • What basis or grounds for payment or nonpayment make sense for AIG?


If a homebuilder constructs a home and finds that he/she cannot sell it for the asking price and, in fact, finds that the market for his product is below the construction loan – what happens?  Most of the time, the bank will foreclose and the sub-contractors, who have mechanic leins against the property, lose their time and receivable.  In other words, they lose because circumstances have changed.

  • Is AIG in the same circumstance?
  • Should the employment compensation contracts be treated similar to a mechanics lien – void through forclosure?
  • Is the government’s bailout of AIG in effect a forclosure to avoid bankrupcy?
  • Is there any reason that AIG should be treated differently than other small businesses that are unable to honor their commitments today?


The definition of business ethics is, in business situations, the discipline dealing with what is good and bad and with a moral duty and obligation.  The question for AIG is – what is the ethical thing to do?  As a business ethics speaker, there is no right or wrong answer to most situations, it rather is a function of doing the right thing considering all the facts and circumstances.  My opinion – the moral duty and obligation in this situation is to void the employment bonus contracts and accept that were it not for the taxpayers, AIG would not be in business!

Now is the time for AIG and any organization that accpets bailout money to make the tough decisions that honor the trust that the federal government and taxpayers have given them.  Look to Lee Iacocca’s example – when the government bailed out Chrysler, he took $1 as his compensation.  Perhaps the folks at AIG should take note.  One thing is for sure they are not winning friends and influencing people – at least not positively.


2 Responses to AIG Bonuses – Ethical or Insane? Business Ethics Speaker Chuck Gallagher Comments…

  1. Ian Griffin says:

    It seems the bonus system in many financial services institutions is out of sync with the rest of the country, and, indeed, with the rest of the world.

    If these bonus payments are contractually obligated then they should be fully disclosed, as should the ones Merrill paid in late December right before BofA took them over. We should, as the British tabloid press likes to do, “name and shame” the recipients and the managers who authorized the payments.

    That would at least mean some of the income inequality in the US (which is at an all-time high) would become more apparent.

    Legally, there might be no way to claw back the money.

    Morally, these people should be asked to come forward and disclose their gains.

  2. R B Easwaran says:

    AIG is certainly entitled to fulfill its bonus agreements with employees if they had already been entered into prior to the bailout package; but, then, AIG should pay it from the cash (if any) it had before receiving the bailout package. The fact that the firm has accepted a huge bailout package obviously means it had no money to even run the business. Bonuses should be given when the employees do an extraordinary job and help the firm make huge profits. Here, the employees have, through their own inefficiencies, brought the firm on its knees. They certainly don’t deserve a bonus, even if there was an agreement; and, more so, from bailout money, which is meant to restructure the company and not to give bonuses to employees. It is absolutely unethical for any of these firms (that are on the verge of collapse) to give bonuses.

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