Peter Klein at Organizations and Markets offers some calming thoughts on the AIG bonus debate.
1. The main lesson is that AIG should never, ever have been bailed out with taxpayer dollars. I said that at the beginning, and I stand by it even more today. AIG should have declared bankruptcy. Under bankruptcy there are well-established, orderly procedures for winding down a firm, distributing the remaining assets among the various legal claimants, and so on. Injecting taxpayer money without any serious thought about the implications of government subsidy and/or ownership for management and governance is just plain dumb. Naturally, thats what Congress and the last President people who know exactly zilch about what companies do and how they are run did.
4. As an outside investor, I certainly would not have the right to renege on whatever prior contractual arrangements I happen not to like. I cant pick and choose, willy-nilly. Employees, contractors, suppliers, bondholders, etc. all have contractual claims on the firm, and my infusion of cash doesnt allow me to ignore these without legal consequences.