AIG Says It Will Try Harder To Cut Costs, Begins By Canceling $10 Million Severance Package

AIG has been repeatedly called on the carpet over the past week or so for indefensible “business as usual” expenditures—a lavish corporate retreat, an executive hunting trip, and severance packages costing tens of millions of dollars. Now, after a meeting with NY Attorney General Andrew Cuomo, they’ve announced they’ll start trying harder to monitor and stomp out unnecessary expenses.

First on the cut list is a $10 million severance package for its former CFO. AIG has also announced that it will work with Cuomo’s office to help “recover tens of millions of dollars in improper expenditures, including compensation given to two former top executives” (which we discussed in this post yesterday).

Under the terms of the agreement, A.I.G. will provide the attorney general’s office with an accounting of all compensation paid to its senior executives. A.I.G. also agreed agreed to cancel all junkets and benefits that are not justified by legitimate business needs. AIG will immediately cancel more than 160 conferences and events, some exceeding more than $750,000 per event, for a total savings of more than $8 million.

On Thursday, the company also agreed to establish tighter management controls on future expenses to prevent any future unwarranted spending on salaries, bonuses, stock options, severance payments, gratuities, benefits, junkets and perks.

AIG also hinted to ABC News that they’ll let their contract for a luxury suite at Madison Square Gardens expire in February, although we suspect they’ll wait to see whether the public scrutiny has passed by then.

“A.I.G. to Help Cuomo Recover Millions in Executive Pay” [DealBook at New York Times]
(Photo: Gene Hunt)

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  1. hankrearden says:

    It “will try harder”? WTF.

    How about “AIG will repay all incurred debts”.

    • stang says:

      @hankrearden: …With the $100 Billion they received from the people.

      That Luxury Suite need to go on the auction block IMMEDIATELY!! As well as any company cars (for managers and exec’s), planes, helicopters, blimps, sky boxes, stadiums, box seats (probably for the World Series), Super Bowl tickets, EVERYTHING…. MUST….GO !!!! If it does not relate to the DIRECT business they do, SELL IT!

      Look, I know this is obvious, but it needs to be said…

      When invididual people are faced with bankruptcy, or money issues, what do they do? Cut expenses, cut costs, go with the bare minimum on everything. AIG needs to do the very same. Cut unnecessary jobs, spending, expenses, and then look at their financial standing. Then, and only then should they ask for money from the feds. Not the other way around.

  2. Scalvo2 says:

    Why can’t we just hang the execs?

    What about the other financial institutions that didn’t get a bail out and have to compete with AIG?

  3. blackmage439 says:

    The first step of many to becoming [or appearing to be] a moral and upstanding company. For this brief moment in time, I salute your efforts, AIG, even if they are only self-serving.

  4. HomersBrain says:

    Lets put the Board of Directors on a plane and push them out and find out how well those “golden parachutes” really work….

  5. zentex says:

    and I’m gonna try harder to consume less oxygen. we’ll see how both work out.

    With all this BS, why hasn’t the govt put a full-time auditor in that company?

    • Pan_theFrog says:

      @zentex:
      They could hire one from AIG. I understand they are hurting for money.

      If they hire one from a competator, then AIG would scream about it being unfair, and how they never get any government contracts.

      If they appoint a government employee to do it, then the taxpayers have to pay for somone to watch their money and that is wrong (or at least that is what it will be reported as in the next election).

  6. hankrearden says:

    LOL @HomersBrain !

    +1

  7. r.hinojosa says:

    They’re only doing this because people are complaining about them. If it weren’t for us outraged with them, they would have done this without any remorse. There’s a difference between in doing what’s right and doing something because you are forced to do so. Screw them.

  8. Andon says:

    Gee, how nice of them….

    [/extreme sarcasm and embittered indignance]

  9. GothamGal says:

    If I run into an AIG executive, I will try very hard to not kick him in the balls.

  10. Jim says:

    I have a feeling this is going to start off with something like…”We must form a task force of the world’s greatest consultants. We will gather this elite group first in Dubai for strategic planning meetings. Later, we will remove them to a secluded Pacific island for a restorative retreat. Then, reconvene in Sydney to review the strategic plan… We’ll need another $58 billion, please, to form this team.”

  11. xspook says:

    Now we know why they’re so ready to raise your rates when you use your insurance…to pay for parties.

  12. SkokieGuy says:

    Remember all the posturing of our candidates and Washington about how the bailout will include oversight?

    Isn’t it interesting that yesterday’s letter threatening legal action was from a STATE’S ATTORNEY, not Washington!

    And within 24 hours, AIG is falling all over themselves to make changes, withdraw compensation, document all recent transactions, etc.

    Washington / huge fail.

    Cuomo proved it ain’t that tough folks.

    • Feminist Whore says:

      @SkokieGuy: It says they actually had a meeting with Cuomo, in addition (I guess) to the original letter. Cuomo must have kicked some serious ass in that meeting, I wish I’d been a fly on the wall.

  13. Red_Flag says:

    Now we just need a superteam crossover between Sheriff Dart and Atty Gen. Cuomo.

  14. incognit000 says:

    Call me when “Greed is Good” is just a quote from a movie, rather than the be-all-end-all of Wall Street.

  15. Snarkysnake says:

    Imagine.

    Imagine that the companies that engineered this train wreck had asked for 700 billion dollars or more of taxpayer money BEFORE they handed it to millions of lying , insolvent borrowers that would not / could not pay it back. Imagine that they had told us that a thin scum of executives at the very top of these companies would become fabulously wealthy by gambling our money on dangerously overextended borrowers and then walk away from the mess with no consequences. Imagine that you have to work extra hours at a hard,dangerous job, your children have to go to work instead of college and you have to work an extra 10-15 years into what would have been your retirement so that a very few could get very,very rich.

    Well, you don’t have to imagine all of the above. It actually happened. The only difference is that the crooks on Wall Street didn’t ask for your money until AFTER it all went boom.

  16. evarga says:

    I’m still wary of being attacked for wearing my Manchester United jersey, which bears the AIG logo in big bold blue on the front. They currently spend $30 million a year to sponsor ManUtd, but that does bring world-wide consistent exposure to the brand, as Champions of Europe and Champions of England.

  17. ilovemom says:

    I’ve been on a math kick lately. Trying to figure out how much money 10 million dollars really is isn’t easy, but that single severance check amounts to $333,333 per year for 30 years. And that’s just one check. These guys are disgusting and shameless.

  18. yorick328 says:

    All CEOs that have driven their companies into the ground deserve lead parachutes to make sure that they hang neatly out to dry.

  19. BrianDaBrain says:

    We canceled the $10 million severance package and replaced it with a $9.5 million package. Whoo hoo!!! Go us!

  20. proskills says:

    Not to play devil’s advocate here, but how exactly is saving $18m going to get them out of a $150b hole?

    • ARP says:

      You’re forgetting the ultimate loophole words, “legitimate business needs.” Remember their definition of legitimate business needs includes the hunting trips, the outrageous compensation, etc.

      @proskills: Some of it is principle. When you give money to a friend or relative who’s fallen on hard times, you assume they’re going to spend responsibly. So even though you GAVE them the money, it probably would annoy you a bit if they went to Vegas and spent the money on hookers and blow. It tells you a lot about the person and whether to trust them in the future (i.e. more oversight). The other part of this is that every little bit counts since its OUR money.

  21. pmcpa2 says:

    They have saved $18m over the last month… now multiply!

    • proskills says:

      @pmcpa2: 18,000,000 / month for 8,333.3 months (694 years) is how long it would take to clear 150,000,000,000 worth of debt without interest.

    • u1itn0w2day says:

      @pmcpa2: This makes you wonder how much they have squandered over the years.

      Everyone seems to forget but AIG and other insurance companies are selling government mandated insurance such as auto insurance.Now if I am forced to buy insurance from a private company shouldn’t the government be trying to control the costs.Or better yet shouldn’t these companies do it on their own so they can show the premium payers they are getting the lowest cost.

      It makes you wonder how many of these perks were built into the cost you pay for one of their policies.

  22. rubberpants says:

    You’d think they’d have done that BEFORE asking for a bail-out. Pants-on-head retarded.

  23. JustThatGuy3 says:

    A lot of these junkets are the company’s way of rewarding top producing agents. If AIG doesn’t keep these people happy, a competitor will. Saving $500k by canceling a trip might sound like a good idea, but not if it’ll cost the company $10MM in sales.

    • alexcassidy says:

      @JustThatGuy3: Well if that competitor didn’t accept billions of dollars in taxpayer money as a reward for fucking up, then they earned it. I personally don’t care if AIG goes under tomorrow. Let ‘em burn.

    • PlanetExpressdelivery says:

      @JustThatGuy3: At this point, I don’t know if AIG will last long enough for any of these lavish trips to matter. I believe the loan issued by the government is simply to allow them more time to split up (with their assets being purchased by other companies more efficiently as opposed to being violently ripped apart). The problem is that they might not ever be able to repay a large amount of this loan, but the damage done by a violent split would cause problems for the consumers of their service.

      In addition, the entire company needs to realize what a quagmire they’re currently embroiled in and realize that these lavish rewards are no longer good for the company’s public image (now that they’re using money loaned from the public), definitely now necessary to produce sale, and that they’re company is in an ocean of hot water.

      • TechnoDestructo says:

        @PlanetExpressdelivery:

        Exactly…how many people are looking at their AIG insurance bills and thinking “why the fuck am I doing business with these scumbags?”

        It doesn’t matter if everyone else does it. They are in a position where it makes them look bad.

  24. darkryd says:

    Suck it, AIG!

    How is it that a company that specializes in managing money sucks so bad at managing money?

  25. copwriter says:

    They were planning on 160 events that **didn’t** have a legitimate business purpose? How could anyone have confidence in a management team that would consider such a thing, even when the company was profitable?

  26. TechnoDestructo says:

    What the fuck do you people WANT? Do you want them to have to have VENEER on their yachts? Is that what you want?

  27. Moosehawk says:

    Let’s all quit lying to ourselves. We all know what we’d do if we had access to a few billion dollars.

  28. SegamanXero says:

    Why in the world of hell is the government bailing these fools out? i mean come on, lavish retreats and whatnot… after they where bailed out. that shoulda been the first thing they cut, maybe severance later. they shoulda never bailed these fools out, and let that company crash as the execs took their lavish retreats wile the company crashed and burned. it would allow for this disgrace to go extinct quicker!

  29. TMurphy says:

    If the elections were next year, Cuomo could run for president and be a shoo-in.

  30. Coopie says:

    So, being Devil’s advocate along with “proskills”, by cancelling $18m in meetings, what are they going to pay in cancellation charges, attrition, and other penalties assessed by the hotels, restaurants, Destination management companies, airlines, ground transportation companies, restaurants and other businesses they were working with to organize all of these conferences? Just because you cancel a meeting, doesn’t mean that you don’t get charged for some or all of the costs.