Small Business Blog from Atlantic Canada

I am "CA" Atreya (PMP, MBA), the author of this blog. I help businesses in Atlantic Canada achieve their BHAG successfully. You may subscribe to this blog using a feed reader (RSS).

If I were an American International Group Inc. (AIG) employee I would quit – in a hurry. I’d rather be at home than become a government employee. Isn’t that what an AIG employee has now become? “Because the government gave me money, I got to do what the government asks me to.” I cannot run my business (unit) without thinking if my actions are going to upset the government and public. Today it is the retention bonuses – tomorrow I’ll be told I can’t make money! AIG won’t be returning to profitability any time soon in this scenario.

Wake up folks – we have a bigger problem to fix than recouping the $165 million in bonuses. None of the individuals who are now thirsting for blood, the current President included, asked for caution when the going was good. I’d like them to let us know their investment portfolio when the going was good.
I think we deserved what we got. As investors we rewarded the traders and financial institutions who provided us with quick growth and high returns on investments. We invested in complex financial instruments we did not understand. We went with the herd. Don’t tell me you were lied to, I do not buy that. What happened to your common sense? Now that the investments have gone sour we are seeking a scapegoat. First it was Lehman Brothers – and now it’s AIG.

For all the crisis we have faced, my loyalty still resides with private business; I will remain a firm proponent of democracy, capitalism, free enterprise and the least government interference. Is it perfect? No, but it can be, once we realize that freedom and responsibility go hand in hand. They are two sides of the same coin. Take advantage of the freedom and succumb to greed and we will pay the price.

Greek and Hindu civilizations worshiped nature in various forms – Sun God, Rain God, Wind God, etc. etc. They were better leaders 4000 years ago than we are now. They realized the value of symbiosis and what it means to their existence. They kept things in harmony. “Never reap more than you can sow; never cut the branch you are sitting on.” Today most businesses do not care what we are doing to the environment. We pillage, we cut, we pollute and we expect laws of nature to bend its rules for us. Again, if you want freedom you got to take responsibility.

Let me ask you a question. As a shareholder, are you in for the long haul? If the business undertakes a loss in a year, do you take a long term view about the business and hold or sell off the stock. My guess is that most people would sell. We reward the CEO for short term performance. What, then, do you think he or she is going to do? Take steps to boost short term profits. His bonus is tied to that. So why would he take a long term view?

When your portfolio consisted of sub-prime mortgage backed securities, did you do your due diligence? I doubt it – you were part of the herd; the fool who thought there would be an even bigger fool to buy the security from you at even higher prices. The US administration is compounding the economic problem one stupid mistake after another. My understanding is that the bail-out monies paid out to AIG are loans – they are not equity, at least that’s what Mr. Liddy has said. As a lender, I have no right to tell the business who to compensate and how much. I should have laid out that condition prior to lending. The only recourse I may have is to call in the loan.

Targeting AIG employees who may not have any role to play in the AIG crisis is a sure way to ensure your good people leave. Anyone with any semblance of self-respect will not remain in AIG after this. How, then, will AIG ensure that it is able to repay the loan if it cannot return to profitability? Another option is to sell of profitable but unrelated business units. Again, how will AIG be able to command a premium on its profitable units if the American public is thirsting for its blood?

The administration is again attacking the confidence of the financial system. First the scapegoat was Lehman Brothers and now it’s AIG. If I were Mr. Liddy, I would file for bankruptcy rather than watch AIG die a slow death.

[Update: 1 April 2009]
Here is an open letter I stumbled across - Dear A.I.G. I Quit