AIG warns its workers as public furor grows
The reaction to AIG's payment of $165 million in bonuses has inspired a level of vitriolic hatred that probably eclipses earlier scandals, including Enron. It's the main topic of both mainstream and new media. Jay Leno quizzed Barack Obama about it on Thursday's "Tonight Show." CNBC continues to blather on about it incessantly.
Of course, members of Congress have reacted with lightning speed. The House of Representatives passed a 90 percent tax on bonuses given to employees with family incomes above $250,000 at companies that have received at least $5 billion in government bailout money. A similar bill is pending in the Senate which the Associated Press says is less punitive.
Outrage over the bonuses is so severe that it makes AIG's survival problematic. "To the average American and to the average politician, AIG is a big amorphous behemoth that is taking money from the public and giving it to people and companies they should not be giving it to," said Michael Kempner, CEO of the MWW Group, a public relations firm that's not advising AIG, in an interview. "That's the perception."
Kempner, who is based in East Rutherford, NJ, said AIG can't solve its problems by hiring a public relations firm. The company will need to "stop listening to their lawyers" and show significantly greater transparency, he said. Even then, that might not be enough.
"AIG has become the symbol of everything wrong with America," he said. "I don't think you have ever seen the level of hostility and the breath of hostility toward a company and its people. If the company survives -- and I am not sure it can -- there is no way to put perfume on this pig."
The uproar over the bonuses paid to AIG has brought back memories for former Enron spokesman Mark Palmer. "I have been thinking about those folks," said Palmer, now head of public relations for Sysco Corp. (SYY), in an interview. "We are in a period of vilification that is largely politically driven . . . You can't really understand it until you are in the middle of it."
Palmer, who was not implicated in any wrong-doing at Enron, said he sympathizes with AIG workers, as the "vast majority had nothing to do with credit default swaps." Others have argued that denying bonuses to AIG workers who contractually fulfilled the terms of their contracts is illegal and could scare away people from financial services firms where such payouts are commonplace.
"It's actually been a benefit to me professionally," he said. "We had a little bit of security [at Enron]. I got some really sick phone calls myself because my name was on so much stuff."
Still, he's not eager to live through an experience like the problems at Enron or AIG again. But he reminds us that the controversy over AIG will die down eventually.