Case 37: American International Group (AIG) and the Bonus Fiasco
In September 2008 American International Group started to fall under the financial crisis in America. The United states enter in a recession in the beginning of 2008 but it didn’t hit until the end of that year. Then all big companies started falling and going bankrupt. They decide to help stop the collapse of the America economy by presenting a bailout package of companies in need. The government created a 750 billion bailout package for American companies that are going under. American International Group is one of companies that took the recesses the hardest. Credit default swap what a big risk for AIG because the value of the company went down. AIG finally decide to ask for bailout money from the government. The government gave AIG 122.8 billion dollars. AIG committed several ethic mistakes after they receive their bailout money from the government. They went on multiple trips and spend a lot on vacations. AIG hand out 218 millions in bonus money to employees. Jake DeSantis wrote a letter to chief executive of AIG explaining what the company did was wrong, but explain why they did all those things. Jake DeSantis step down form his position of executive vice president.
Critical Factors of Success:
AIG have some factors for their success. The management took a lot risk that was concern out of the norm. AIG was made a profit when they did the credit default swaps. Utilizing the government bailout was a successful move. If they protery use the bailout for its propose. Mr. DeSantis letter is great it showed the company feel sorry for what they did and their going to change. The ethical factors in the bonuses was a good move to keep people from leaving the company.
Major Problem and Opportunity:
The major problem for this case in economy bubble burst in 2008. The poor economy many companies need help from the government. The default so they can gain good amount of profit. After...