Economic Crisis Was Precipitated by Term Paper

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The second recommendation I would make with respect to external communications is that Liddy adopt more stringent measures than the government has insisted upon with respect to spending controls. The government has set out some measures, but AIG should be tougher than that. This would demonstrate a sense of culpability on the part of the company for the fact that the situation it is in is of its own making. A major component of the public's offense is that it feels cheated in the deal. Taxpayers, many of whom are feeling the sting of economic hardship themselves, are insulted that they have been called upon to bailout a company that then pays six and seven-figure bonuses to its executives. Most of the people contributing tax dollars to those bonuses will never see money like that in their lives. Liddy has the luxurious advantage of not being directly responsible for the AIG mess. He needs to be fully sympathetic with the public on this issue -- they are the taxpayers for whom he works.

Q3. Internally, such contrition may not sit well. AIG employees may feel like the leader who was airlifted into the company by the government is now throwing them under the bus. Regardless of whether or not they deserve it, there is little doubt that morale will be affected. With respect to morale, Liddy should not be too concerned. His position is that of a hatchet man. His job -- as mandated by the government -- is to fix the problems at AIG. He actually has little responsibility to the employees at AIG beyond the role they will play in the firm's recovery. His role is thus simply to lay out the facts -- they are owned by the government and significant work will be undertaken in order to restore the company.

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The employees can either get behind that effort or they can bring the company to its knees.

Liddy need not worry about employees not performing in their jobs for a couple of reasons. One is that most employees are not significantly motivated by money anyway. Most employees are motivated by higher order needs. They are probably embarrassed by both the government takeover and the bonus scandal, as employees at MCI were similarly embarrassed by the WorldCom debacle. Thus, the average AIG employee is probably more motivated by the need to set things right and preserve their long-term future than by short-term bonus concerns.

It stands to reason that AIG could lose a few people if they do not get their bonuses. There is a principle issue involved in that the contracts from which those contracts were derived were signed in good faith. The employees likely feel as though they have become political footballs. However, employees motivated strictly by selfish concerns are not what the company needs to rebuild itself. There will be sacrifice, change and a lot of work to restore AIG and the company needs only team players. The point of Liddy communicating this is to get the selfish people out -- this is a desirable outcome not an undesirable one. The company simply isn't in a position to hand out lucrative financial rewards, it would be unwise for Liddy to convince potential malcontents to stay, especially in light off the required overhaul of the company's operations and compensation systems.

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