AIG's Sullivan: New Poster Boy for Excessive Pay

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  1

  Mike Patton

  06/19/08 | Report as spam

  Unfortunate mischaracterizations

  Sullivan's actual "severance" is some fraction of the reported numbers.
  
  Per this news story (http://news.yahoo.com/s/afp/20080617/ts_alt_afp/uscompanyinsuranceaigfinanceexecutive_080617220255):
  
  "According to the Corporate Library, the package for Sullivan would include 26.6 million dollars in cash bonuses, 21.9 million in stock awards and 14 million dollars in a deferred compensation plan. Pension, salary and insurance benefits would also be included."
  
  At least $35.9 million of that number looks clearly to be something he already owned at the time of his firing. The $26.6 million seems odd, in the context of AIG's losses, but to claim that the entire amount is severance pay betrays either a complete lack of understanding, or an unattractive desire to deprive someone of assets that they already own.
  
  The same is true of Chuck Prince and Stan O'Neal - the vast majority of their "exit packages" was comprised of assets they already owned, hyperventilation in the media notwithstanding.
  
  Sure, they're big numbers, but in no rational, honest world could the entire these arrangements be called severance payments, and it's dishonest of the Corporate Library, and all headline writers on the various stories, to claim them as such.

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  2

  pgaluszka

  06/19/08 | Report as spam

  A big payout nonetheless

  Assuming Mr. Patton's numbers are correct and bowing to the distinctions he is making, Sullivan would still get a severance of at least $26.6 million if my math is right and probably quite a bit more. Is that a puny amount?
  
  Peter Galuszka

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  3

  totefrosch

  06/19/08 | Report as spam

  RE: AIG's Sullivan: New Poster Boy for Excessive Pay

  So much for accountability, huh? The Golden Parachuters are not NFL superstars they once claimed to be. The golden parachute, in my opinion should be done away with and replaced with performances bonuses voted on by the board. This relatively new system of CEO incentives has done more harm than good because it has encouraged the "old boy network" to prosper. Good CEOs aren't afraid of performance bonuses over a golden parachute.

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  4

  mbmattis@...

  06/23/08 | Report as spam

  Good Idea

  An excellent idea, sir!

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  5

  sumitkr.sharma@...

  06/19/08 | Report as spam

  Compensation for efforts

  As Mr. Patton already stated it, A substantially large part of payout was deffered bonus and stock options which belonged to Fired CEOs such as Mr. Sullivan, Mr. Prince or Mr. O'Neal.
  
  Secondly, it is a question of opportunity cost by these executives who chose to stay and fight rather than moving out at first sign of distress. Not a single person can point fingers at Mr O'Neal for successfully transferring Mummy Meryll to a lean organisation with highest profits. No one can argue that Mr. Sullivan tried hard to steer AIG away from rough weather. The first person to get the Axe for not choosing a CEO better than Mr. Sullivan should be Board of AIG itself.
  
  
  Lastly, Borad can not play russian roulette with a CEO who chooses to steer the company himself. Will the Board pay a CEO 5X bonus if earnings grow 5 times?? No, it will only be a fraction of it. So the executives also have a right to make some money if risk hedging bet of board goes wrong.

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  6

  al scott

  06/20/08 | Report as spam

  RE: AIG's Sullivan: New Poster Boy for Excessive Pay

  Shareholders need to realise that there excessive demand for higher returns on investment, may affect an organisation's risk profile adversely. The old adege still applies "high risk, high returns or high losses",we tend to forget the latter. Sanctions should be applied to all remuneration contracts thus setting limits on management sometimes unbridled risk taking.

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  7

  mpollak@...

  06/20/08 | Report as spam

  RE: AIG's Sullivan: New Poster Boy for Excessive Pay

  I think they should analyse caose of such big loses, and if CEO is to blame, then not only he should NOT get any money, he should go to jail and all his property should be confiscated!
  But, if he HAS done aa that could be done in such situation, then WHY to fire him? Nobody would do better in his place!
  Also, nobody say how much is total capital involwed, so we could see what % this loses represent in comparison?
  I is not easy to invest realy big money, but I have plan that would bring lot of profit even with sums equall to loses mentioned, and stabilize prices of oil in process as demand would drop to far less than half. That would be excelent opportunity for investing really big money and getting still greater returns in long run, but who would ask me? I am not US citizen!
  Regards from Zagreb, the capitol of Croatia, Europe!
  Marijan Pollak, IT SA/SE 1st Class, retired
  P.S. If somebody would like to contact me: mpollak@globalnet.hr

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  8

  chedester

  06/20/08 | Report as spam

  RE: AIG's Sullivan: New Poster Boy for Excessive Pay

  Most of these "Golden Parachutes" should not come as any surprise. It's hard to get someone who is already a millionaire to accept the increased visibility and responsibility without some guarantees, even for non-performance. What should be revealed to stockholders are the bail out provisions at the time of selection, not just the name and partial history of the next corporate "messiah" .

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  9

  ldmack3

  06/20/08 | Report as spam

  Excessive Pay?

  1. By whose standards is it "excessive"?
  2. Stockholders, not the government should control amount.

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  10

  pingpaul

  06/20/08 | Report as spam

  CEO "Pay for Failure"

  When one piously speaks of "meritocracy" and "pay for performance" then makes huge payouts after a major failure, hypocracy becomes the elephant in the room.
  The Board of Directors should have the courage to reject demands for "pay for failure" when an executive employment contract is written. They are the people who can demand that employment contracts adhere to a "pay for performance" policy. Perhaps a "Board Room Watch" column can be inaugurated. The object is to hold directors who sit on boards that approve golden parachutes accountable.

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  RandyU

  06/20/08 | Report as spam

  I blame you

  I respectfully submit this thought:
  
  The everyday working people are directly responsible for the compensation debacle. As long as they (we) are still willing to 'leave their money on the table' throughout this entire episode of gross overcompensation it will continue. Why do they (we) do it? Because they are just as greedy ,(and arguably as spineless) as the people directly involved in these outrageous compensation packages.
  
  Americans are pouring lots of money into the stock market every day via their retirement accounts. They continue to do it in the hopes of an unrealistic return on their investments. If people would 'just say no' to the stock market for a while, and not participate in the stock market orgy, the funds would start to be cut off. We as everyday Americans are contributing directly to this compensation problem by continuing to feed the monster with our retirement money. The mutual fund's send out fliers telling people to stay the course, keep investing even in bad times. "Dollar cost average" they say. These are the same people that are compensated based upon the size of their funds, so what else are they possibly going to say???? If you are one of these sheep that does follow the 'common sense' advice, - expect to get fleeced.
  
  For those that say that the stock market is the only way to get good returns, I say "Oh Paleeesssseeee". Have some imagination people. If we all live to be 300, we most certainly would do fantastically in the stock market. I don't have that option.
  
  That is my opinion, and I have put my money where my mouth is. I quit feeding the greedy corporate compensation monster. I'll get back to you in 10 years and let you know how I fare with my own creative investments and if I make it to retirement or not.

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  12

  frank1216

  07/05/08 | Report as spam

  RE: AIG's Sullivan: New Poster Boy for Excessive Pay

  CEOSW ARE DRIVEN BY GREED.pASS A LAW NO PROFITS NO BONUSES
  BETTER YER NO STOCK OPTIONS CAN BE CASHED ON IPO'S UNTIL A PROFIT IS REPORTED.THAT WILL SCREW THE UNDERWRITERS AND ASSOCIATED THIEVES

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  13

  frank1216

  07/05/08 | Report as spam

  RE: AIG's Sullivan: New Poster Boy for Excessive Pay

  CEOS ARE DRIVEN BY GREED.PASS A LAW NO PROFITS NO BONUSES
  BETTER YET NO STOCK OPTIONS CAN BE CASHED ON IPO'S UNTIL A PROFIT IS REPORTED.THAT WILL SCREW THE UNDERWRITERS AND ASSOCIATED THIEVES

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  14

  asmrtic

  09/19/08 | Report as spam

  RE: AIG's Sullivan: New Poster Boy for Excessive Pay

  And he should have taken a lesson from another "Sullivan" who screwed up -- Worldcom's CFO Scott Sullivan -- who kept on spending even as he was on a downward spiral financially. Shame on all of them!

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  knownot

  11/14/08 | Report as spam

  RE: AIG's Sullivan: New Poster Boy for Excessive Pay

  We wouldn't be talking about it if he hadn't failed. Fact is, I think he's smarter than the rest of us. More power to him. Let him get as much as he can from us. We as a society evidently want to reward him, and the other people that we so grossly overpay.
  
  Our values are whacked, and he is only one example. You can't blame him for playing the game by the established rules.