Question

How does the topic executive compensation inequality relate to the American International Group (AIG) Bonus Fiasco?

Answer 1

With the market capitalisation of these major corporations, the executive pay has increased.
When companies become more complex the market for top executives is growing and they are demanding higher pay.
In 2004-2005, CEOs made up just about 3 percent of individuals with the top 0.1 percent of U.S. adjusted gross income, a proportion that had shifted little from a decade ago. Take home compensation for CEOs is directly performance related. Independent directors set out the salaries of the CEOs of most of the major corporations.

Executives have more opportunities to safeguard their reputation and ensure the long-term value of equity and the company's sustainable growth. Executive compensation should be monitored because executives are seeking to maximize their profits rather than those of the shareholders they serve. While CEOs and other executives are paid by different independent directors, it is true that such individuals will manipulate them.

AIG experienced a liquidity crisis on September 16, 2008 following the reduction of its credit rating. AIG obtained from the Federal Reserve a credit facility of $85 billion in return for warrants for a 79.9 percent equity stake. After that American International Group (AIG) has been kept afloat by more than $170 billion in federal funding since September 2008. Works to around $1,500 for every household in U.S. AIG paid hundreds of senior workers more than $500 million in wages and bonuses, even though it was being bailed out by the government.

Greed of the executives The controversy over AIG's salaries reached a new level in the wake of reports that it compensated workers with $450 million in compensation for 2008 as its stock plummeted from $57.14 per share to $1.57 per share. Worse, $165 million in rewards came in the form of "retention" compensation for workers in its financial instruments division who sold complex derivatives at the center of the company's fin. AIG reported a loss of $99.2 billion in 2008, with a record loss of $61.7 billion in the fourth quarter alone