Magazine article Risk Management

Too Big to Fail?

Magazine article Risk Management

Too Big to Fail?

Article excerpt

Every drama needs a villain. Star Wars had Darth Vader. The corporate accounting scandal had Enron. And lately it looks like the financial collapse has AIG. But before everyone readies their pitchforks and torches, I think a little perspective is in order. It seems that the populist rage toward all things MG is a bit misguided.

Now before I explain, let me start by saying that I am no AIG apologist. At best, the company's financial practices displayed a shameful level of arrogance and irresponsibility and their inability to practice even the most basic risk management has been instrumental in perpetuating this economic collapse. The fact that this behavior comes from a company with the once-exalted stature of an AIG would be shocking if previous cases of corporate greed and malfeasance hadn't already desensitized us to these sorts of events. Sadly, we expect corporate America to let us down and AIG certainly has done that at a level rarely experienced in the country's economic history.

But the recent bonus controversy has sparked more than just weary sighs. Outrage was the word of the day on Capitol Hill, in television studios and in offices everywhere. Resignation turned to anger at a level usually reserved for rapists and murderers. In his testimony before Congress, MG CEO Edward Liddy read death threats from people who wanted "all the executives and their families" to be "executed with piano wire around their necks." MG's Corporate Security issued an internal memo advising employees to be vigilant against possible threats, with safety tips that included concealing any identification or apparel with the AIG insignia, travelling in pairs, parking in well-lit areas and reporting any suspicious or out-of-place individuals in or around MG facilities. Basically, all employees were to live in fear because of the mistakes the company's previous leadership. After all, just because a receptionist or a data entry clerk might want to make a living and provide for his or her family, it is no reason they should be doing so at MG. Somehow, even working for the company has become a capital crime.

And all because of what? $165 million of bonuses that amounted to 0. …

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