I know this is supposed to be a blog about addressing climate change, so why do I continue to harp on executive compensation patterns? Because it is at the heart of how we structure our economy and reflects what we value as a society. One of the reasons we stand at the edge of the abyss of economic ruin today is because of compensation patterns, and one reason our economy has thus far failed to regulate greenhouse gases and deferred addressing the urgent threat of climate change is also directly related to how we compensate executive leadership.
Corporate management is never going to be able to address long-term issues like climate change and sustainable development without an appreciation for systems thinking. What happened to AIG was the result of the creation of a culture that abandoned any such appreciation for systems thinking and replaced it with a myopic focus on maximizing short-term results. In a toothless regulatory environment greed took over, more was better than less, so AIG kept doing more - and the final results speak for themselves.
Today's headline in the Wall Street Journal "AIG to Pay $450 Million in Bonuses" points to the absurdity if not obscenity of what is still going on. Mr. Liddy, AIG's CEO wrote to Treasury Secretary Tim Geithner that AIG "cannot attract and retain the best and brightest talent … if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury." Where have I heard that term before - the best and the brightest? Oh yeah, that was the title of David Halberstam's insightful and excellent book on how America was dragged into the abyss of Vietnam by really smart people. Was it not AIG's best and brightest - people like Joe Cassano - who created this catastrophe? TPM Muckraker referred to this ilk as the Axis of Weasels financial engineers who risked all their firm's money, engineered personal fortunes for themselves and then left Joan and John Q. Taxpayer to absorb all the risk?
Now we're supposed make sure some of these very same guys get bonus and retention pay of over $1 Billion? Absurd! No, OBSCENE! And God help the planet if this is the way corporate America is run in the 21st century.
Late breaking news from the NY Times: President Obama seeks to block AIG bonuses.
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