Benmosche Backtracks

AIG's feisty and possibly manic depressive CEO has backtracked on his threat to quit after just three months on the job. In an internal memo, conveniently leaked to the press, and aimed at assuaging employees' fears of losing all of his talent after only getting a taste of it, Mr. Benmosche wrote that he remains "totally committed to leading AIG through its challenges." Well, maybe except for when he's on vacation in Croatia. Or, maybe except for if he's not getting paid $10.5 million for his trouble. Or, if it means having to suffer more indignities at the thought of some Paz Czar telling him how he can pay his employees. But other than that, he's really committed.

According to the FT, a meeting last week in New York between AIG's directors, led by Mr. Benmosche, told Ken Feinberg (aka "Pay Czar") that his recent decision to slash salaries for 12 of its top executives by more than 90% was leading to high level departures and upsetting employees morale. That's interesting, because I can only think of one thing more upsetting to employee morale than getting a cut in salary and that would be bankruptcy. The great thing about your employer going bankrupt is that you not only lose your job, but you now become an unsecured creditor for any accrued benefits that you had tied up in the company. Then you get to join the other 8 million or so people who've been laid off in the past year and a half. Or better yet, you get to join the many, many people who have exhausted their unemployment benefits and are taking huge cuts in pay just to get a job. In any event, Mr. Feinberg replied that AIG "did not get" the fact that it had been bailed out with billions of dollars in taxpayers' funds. Nice response, Mr. Feinberg. At least somebody gets it.

What's interesting about this whole brouhaha over pay is that there is a brouhaha over pay going on. Mr. Benmosche has been on the job for three months and all we're doing is arguing over pay, as if pay is the most important thing going on at AIG. Furthermore, AIG is using comp as a way to insist that somehow paying people more is going to miraculously make the company earn over $120 billion in the next few years to pay back the government. It's just not going to happen. With the huge rally in credit spreads and the stock market in the past six months, AIG should be making multiple billions now if it had a shot of ever paying the money back. Sure the company turned a $455 million profit this quarter, but so what? Every time it sells off a unit, it takes another huge hit to earnings, because it seems everything was carried at extremely optimistic valuations on its books. So, I say, let the talent leave, replace it with others who want or need the job and wind the damn thing down and put it out of its misery.