The Aig Bailout: Motivation and Leadership Ethics

THE AIG BAILOUT: MOTIVATION AND LEADERSHIP ETHICS

Motivation is one key ingredient to leading a company to success. While there are numerous methods a leader can use to motivate employees questionable behaviors of a manager may motivate an employee to perform unethically. Case and point is the American International Group (AIG) bailout saga. AIG is predominantly an insurance company with minimal focus in financial services. In 2008 AIG encountered turmoil of great capital loss that almost led to its total collapse (Saporito et al., 2009). Fortunately for AIG the U.S. Government came to it’s aid and provided monetary support for the sole purpose of preventing a global meltdown in the economy. As a result of executive actions following government assistance, questions of leadership motives, qualities, and ethics were brought to the forefront. The focus of this paper is not only to reveal the method of motivation noted in the AIG Case Study, but also highlight the basis of actions or behaviors among the CEOs and top executives within three financial firms: AIG, Global Crossing, and Man Financial Global Holdings (MF Global).

Performance Motivation

Retention Bonuses

According to Saporito et al. (2009), in 2008 AIG’s Chief Executive Officer (CEO) was made aware of financial losses that plagued the company as a result of poor performance within the Financial Products unit (pp. 12-18). Instead of withholding the usual bonus based-on-performance that was given to the top executives in addition to him self, the CEO opted to ignore the financial status of the company and move forward with issuing bonuses in the millions. As if this wasn’t enough to help cripple the company and the economy the CEO once again issued ‘retention bonuses’ for those same top executives using the bailout relief funds provided by the U.S. Government (Saporito et al., 2009). The controversy that surrounded the provision of bonuses while AIG was at the brink of an economic demise created questions of unethical behavior, greed, poor leadership, and fraudulent acts among the very people that were responsible for the financial collapse of AIG.

Self-Greed

In 2009 AIG sparked a global controversy when top executives of the company received retention bonuses using U.S. Government bailout relief funds through the Troubled Asset Relief Program (TARP) assistance (Saporito et al., 2009). Prior to receiving the bailout relief funds AIG noted a loss of billions of dollars within its Financial Products unit. The Financial Products Unit had participated in trades that brought only short-term benefits. Short-term benefits meant money in executives’ pockets. Since focus was on short-term goals the financial profits that would sustain the growth of the company and benefit the shareholders was obsolete. In essence,