Posted tagged ‘AIG’

A collective purpose

March 18, 2009

Today this blog is coming to you from Washington DC, a place that has traditionally turned itself into something Irish on St Patrick’s Day. And so right on cue, the water fountain outside the White House has turned green for the day.

But amidst the normal Irish bonhomie, in reality there is only one topic of conversation here: the bonuses being paid to senior executives of the insurance company AIG. The latter company, as most people will know, ran into serious financial difficulties in 2008 and was saved from insolvency only through a taxpayer bail-out originally agreed by the Bush administration. More recently the company asked for and was promised more government financial support. And then the US government – now owning 80 per cent of the company – discovered that a number of senior executives were claiming and were to have paid out to them some very substantial bonuses, amounting in total to $165m. These payments are needed, the company has argued, to persuade the executives in question to remain with the company; and they are required to be paid under these employees’ contracts.

The fall-out from all this has been extraordinary, and is still building up momentum. Commentators all over the media and in the blog world are expressing their disgust at the conduct of the company and its executives, but also showing some disappointment with the government for not stopping the payments, contracts or no contracts; indeed the latter complaint has probably directly caused a slight (but noticeable) drop in President Obama’s opinion poll ratings.

My guess is that the AIG executives will not get to enjoy their bonuses; the government will find some way to stop them. Indeed, I would not be too sure about the ‘retention’ of these executives, with or without bonuses.

But the broader lesson, which has validity in all countries now tossed about in the stormy waters of the recession, is that people cannot behave as if the current crisis did not exist, or as if some (particularly those with a hand in getting us to where we are) could claim exemption from the sacrifices and hardships we now have to face. We also need urgently to leave behind us the sometimes audible opinion that it is right that society should now make sacrifices to allow us to escape from this recession – as long as the sacrifice is being made by others, not us. We need a collective purpose now, in which everyone makes the effort and, to an appropriate degree, shares the burden.

As banks fall, is it time to panic now?

September 19, 2008

Well, no. Absolutely not. But it is clear that what we are now witnessing is something at any rate much more complex than an economic slowdown. Lehman Brothers, HBOS, AIG – it all seems to be coming closer to us (after all, AIG sponsors Manchester United).

This afternoon I was standing at a supermarket check-out, and two elderly ladies were chatting – first about a planned birthday party, then about grandchildren, and then about the credit crunch and the liquidity of investment banks. And that’s when you know that the problems of the financial world have landed on our doorsteps.

But in a funny kind of way, this isn’t the 1980s, either. I doubt that we are going to have 20 per cent inflation, or even 20 per cent unemployment – all things that we witnessed at some point back then. The foundations of our economy are now different, and unless everything melts down (in which case what I am writing doesn’t matter anyway) we will not go back to those experiences.

In the end, there is little that destabilises society so quickly as panic, and it is important amidst all the financial storms that we remain calm. What we need in particular is a sense of purpose and determination, and a clear focus on the things that will help to get us put of the downturn at the earliest opportunity. In my own setting, I am assuming that public money will be scarce for a while, and this means driving our strategy to develop streams of income from other sources. At times such as this, we need to be particularly good at innovation, and to be ready to be imaginative.

It is not the time to be cautious and defensive. It is time to be entrepreneurial, and not too risk averse. DCU’s new strategy, on which I shall write again in due course, will – I hope – reflect that, and I hope the same will be true for Ireland.