Tag Archives: AIG

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Bailed Out Execs Now Have a Salary Cap

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Now that we all have universal health care (wait? It doesn’t really kick in for four more years? Oh), the White House has given us another piece of progress from the “probably should have happened a long time ago” file.

Yes, now that only a handful companies are still benefitting greatly from public assistance, the administration has agreed to cap the pay for the top 25 executives of the five companies “still receiving extraordinary aid” via bailout. And really, it’s more like three companies since it comes down to only AIG, GM and its financing company GMAC, and Chrysler and its financing company Chrysler Financial.

Feinberg’s announcement was the administration’s latest effort to deal with public outrage over bonus payments provided to executives at companies receiving billions of dollars in taxpayer support.

Detailing the 2010 pay rules, Feinberg said cash salaries would be capped at $500,000 for 82 percent of the top 25 executives at the five firms. These executives would have to receive any further compensation in stock. Feinberg is seeking to link the executives’ decisions more closely to the success of their companies.

In addition, “pay czar” Kenneth Feinberg is also mandating that 419 companies that benefitted from bailout money before February 17, 2009, give detailed information on any salaries in excess of $500,000 paid to executives in late 2008 and early 2009. What exactly Feinberg plans to do with this information eludes me, but companies have 30 days to comply.

Under the law, Feinberg cannot require executives to return any compensation such as 2008 bonuses that he deems excessive. But Feinberg said he would review the compensation paid during that period to see if any of it could be deemed “inconsistent with the public interest.”

I think many interested members of the public could tell Kenneth their thoughts on that topic immediately, but it’s nice to know that he will have some more detailed info into the matter next month.

greedy executive businessman

Before the cap, he would have been carrying three bags.

Risk Management Links of the Day … Featuring Android Phishing

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  • A “phisher” looking to gain access to people’s banking details managed to upload a malicious app to the app store for Google’s Android smart phone (which is Google’s answer to the iPhone). And while it was quickly removed once discovered, this brings into question whether or not Google needs to be more stringent on the apps it allows into the Android Marketplace. “The rogue Android application posed as a legitimate banking applet, but was actually designed to trick marks into handing over bank login details to fraudsters, an alert by credit union First Tech warns. The credit union, which said it wasn’t targeted by the attack, doesn’t even have an app for Android as yet.” And the macro-level threat here is, of course, the vulnerability of smart phones, which are increasingly becoming indispensable web portals for millions. Many expect similar attacks to rise in 2010.
  • In a candid Wall Street Journal interview this weekend, Hank Greenberg questioned the terms of the AIG bailout and instructed journalists to start looking deeper into Goldman Sachs’ actions before the financial collapse. “There’s too much smoke, too many smart people asking questions that deserve an answer. I would hope that investigative reporters do the job they love to do and bring out the truth. I would hope that Congress would then say we must do something about this in all fairness.

    The American people should know about this and then bring about the changes necessary to avoid the total destruction of a great company that was the pride of America in the insurance industry.

    ” Hank would seemingly be the first in line among AIG shareholders to file a class-action lawsuit to recoup all the losses that have (in his view, unfairly) occurred since the Fall of 2008, but — for now at least — he isn’t going that far. He has, however, presented the Fed with a plan in which AIG’s “$112 billion loan [would be] stretched out to, say, 20 years and the interest rate slashed to something closer to the government’s own cost of borrowing.” Good luck with that.

  • The Basel Committe on Banking Supervision has identified several areas that it must address in more depth, including coming up with more concrete principles to help replace International Accounting Standard (IAS) 39. And that might prove contentious. “This could put regulators on a collision course with the International Accounting Standards Board (IASB), which published proposals for consultation on November 5 to replace the incurred loss model with an expected loss model as part of the overhaul of IAS 39.” You know what that means? ACCOUNTING FIGHT.
  • A man who was pretending to be a rock concert promoter was indicted for running a Ponzi scheme. “According to the indictment, [Miko Dion] Wady operated and had an ownership interest in various business enterprises that purportedly were engaged in the business of promoting concerts or tours of well known entertainers and artists.”The indictment alleges that Wady and others misled victim investors into believing that Wady entered into performance contracts and other business arrangements with nationally and internationally known entertainers, arranged performance venues throughout the world, and greatly profited by putting on these concert or tour events. The indictment alleges that from 2004 through 2007, Wady claimed to have promoted concerts for The Rolling Stones, U2, Barbara Streisand, Faith Hill, Tim McGraw, Mariah Carey, George Strait, Billy Joel, Jamie Foxx, Jimmy Buffet, Mary J. Blige, Pearl Jam, and at least 30 other well known artists and entertainers.

    Also according to the indictment, during this period, Wady appears to have actually promoted fewer than 10 concerts, all involving only local or lesser known artists.”

Find an interesting link? Email me any stories, videos or images you come across. Or just follow me on Twitter @RiskMgmt to pass along the news.

Risk Management Links of the Day: 01.05.10

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geoengineering

  • Geoengineering in regards to the environment and climate change has increasingly been gaining mainstream interest over the past year after spending most of its days mired in obscurity or outright condemnation. I’ve personally written about it twice in the past few months both in regards to Bill Gates’ discussion on thwarting hurricanes and SuperFreakonomics‘ assertion that widespread geoengineering to slow climate change is a good solution. Still, the concept remains widely misunderstood and obviously has both positive and worrisome components. To help everyone become better informed about the concept, the MIT Technology Review has taken an exhaustive look at the possibilities of society geoengineering our way out of climate change.
  • Rick Nason teaches an ERM class and while skeptical of the practicality of teaching this within an MBA curriculum, he has a question for you: “ERM has created a lot of excitement, but very few successful examples. Explain why you believe ERM has so few successful implementations.” Head over there to answer. And show your work. (via RiskCzar)
  • Les Krantz breaks down the 200 best and worst jobs in the U.S. in his “Jobs Rated Almanac.” And you know what’s number one? Actuary. “Actuaries, who evaluate the financial impact of risk on an organization, fared best because they work during standard business hours and in favorable conditions — indoors and in places free of toxic fumes or loud noise — as opposed to those jobs toward the bottom of the list such as iron worker, dairy farmer and the biggest loser from last year’s study, lumberjack.” Google “Norm MacDonald,” “Weekend Update” and “worst job” to find out what ranked dead last this year — again.

Find an interesting link? Email me any stories, videos or images you come across. Or just follow me on Twitter @RiskMgmt to pass along the news.

Risk Management Links of the Day: 12.17.09

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credit suisse sanctions 536 million

  • Forbes published a good piece on how Credit Suisse has aided clients from rogue nations like Iran, Cuba, Burma and Libya sidestep U.S. sanctions for nearly a quarter century, an infraction that will cost the Zurich bank $536 million for violating the the International Emergency Economic Powers Act as well as New York State law. “Credit Suisse first started dealing with rogue regimes that were sanctioned by the U.S. government in 1986, when the Zurich-based bank began to assist Libyan customers in evading sanctions by executing payment orders without stating their names, according to U.S. authorities. Later Credit Suisse started to refine its methods, processing payments for clients in sanctioned countries with payment messages that concealed the identity of customers by using false codes. Credit Suisse did this kind of business for other clients in countries that faced U.S. sanctions, including Sudan, Libya, Burma, Cuba, and Charles Taylor’s Liberia, the Treasury Department says.”
  • The SEC approves enhanced disclosure about risk, compensation and corporate governance. “The Securities and Exchange Commission today approved rules to enhance the information provided to shareholders so they are better able to evaluate the leadership of public companies. Beginning in the upcoming annual reporting and proxy season, the new rules will improve corporate disclosure regarding risk, compensation and corporate governance matters when voting decisions are made.”
  • RSA Insurance Group and the WWF (the environmental group, not the wrestling association that was renamed the WWE) began a three-year partnership that will center on conducting joint research efforts into all things Mother Nature and risky.
  • The percentage of commercial insurance buyers who have an exposure insured with Chartis has dropped from 90% in July to 80% now. Still a high number, but a significant drop. Although Barclays is saying that most of those who are still on board with the AIG insurance arm now plan to stay. “Of commercial buyers that insure with Chartis, Barclays said roughly 75% of those customers plan to stay with the unit despite AIG’s troubles, up sharply from 40% of customers who said they would stay with Chartis in July.”
  • A guy named TJ Sullivan who is CEO of CampusSpeak, Inc. has dubbed the crackdown on Greek life shenanigans on campus as “the risk management era.” He explains in more detail: “The emphasis was on rules and policy adherence. It dominated everything: chapter services strategies, fraternity education, volunteer training and duties, consultant training, board meetings, etc. Someone a lot smarter than I will write a book about this, and I’m sure opinions will vary on whether or not it was a good, important era, or a harmful one. Was there any net benefit? Some will say that fraternities and sororities grew stronger during this time. The values congruence crowd will continue to crow about how risk management draws us closer to the values we were founded upon (a weak argument, I’d say). Others will say fraternities and sororities lost their fun, their innocence, and their relevance. One thing for sure, lawyers and insurance agents made a lot of money. Yet, students are still dying from alcohol poisoning and hazing on a regular basis.”
  • A new Swiss Re Sigma study analyzes commercial liability insurance. “Emerging risks due to technological and social developments are a constant challenge: new insights into and changing standards around food safety, environmental pollution, employment practices and the compensation of financial loss are, for example, risks that insurers closely monitor. Roman Lechner, co-author of the sigma study, said: “Fortunately, none of these emerging risks has evolved into the next asbestos — yet.”

UPDATE:

  • MF Global was fined $10 million by the Commodity Futures Trading Commission for three risk management failures related to supervision. “The $10 million penalty imposed by the Commodity Futures Trading Commission is the latest fallout from rogue wheat-futures trades in 2008 that forced the company to take a $141.5 million charge, triggering a restructuring that led to the departure of its chief executive, Kevin Davis.”
  • In his latest View from the Press Box, Sam Friedman gives us some 20/20 hindsight on his previous predictions for 2009. “Way back on Jan. 5, I peered into my crystal ball for the likely Top-10 Property and Casualty Insurance Stories of 2009. Before I reveal what turned out to be my actual picks here on Dec. 21, let’s see how accurate my predictions were.”

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