I haven't written much about the AIG bonus issue because it's been so obviously an exercise in Kabuki. Today we actually heard from someone from AIG who isn't groveling about his role with the company. The New York Times, bless its soul, printed an open letter from AIG hand Jake DeSantis to Edward Liddy, the chief exec of the giant insurer. De Santis's letter pretty much speaks for itself.
I understand how retention bonuses work because I earned one from Bank of America in 2006. The circumstances were different — B of A had decided to close its Minnesota offices and was moving operations to Hillsboro, Oregon. As a result of this, I ended up losing my job. B of A knew that the move would be disruptive to its business, so it offered me and a number of my colleagues the opportunity to earn a retention bonus if we stayed with the company while it wound down its operations in Minnesota. While the bonus was only a fraction of what the AIG folks earned, it represented the equivalent of an additional 2-3 months' salary. Rather than leave B of A early, I stayed on and worked to the end.
It was the right thing for B of A to do. While I was hardly irreplaceable, it would have hurt the line of business substantially if I'd left early. That is why companies pay retention bonuses. I never felt bad about taking the bonus, because I'd earned it.
No matter what you might think of AIG generally, it had a legitimate business reason to pay such bonuses, because retaining people who can do complicated tasks is a big challenge. If you want to keep people in position, you have to pay them. And since DeSantis was a "dollar a year" man, he essentially worked for free this year, since he is now in the position of having to give up his bonus. And now AIG won't have his services for much longer. Perhaps one of AIG's critics can do the work that DeSantis does, but I wouldn't bet on it.