AIG Bonus Issue – Lessons for Entrepreneurs

It is amusing to see the false outrage and hypocrisy from Congress and the President related to the AIG bonus issue. The focus is on bonuses of initially $165 million and maybe now to slightly over $200 million.  How ironic! The Congress and the President are spending billions, approaching trillions, of dollars – some for “pork-laden” projects.  Most of the spending that is supposed to be for stimulating or helping the economy is “iffy” at best. There does not seem to be any outrage over that! Instead, Congress is overreacting and passing retroactive tax increases to get the bonuses back!

Even for billions of dollars loaned to AIG there is no oversight as to where the money is being spent, rather the emphasis is on a relatively minuscule amount of bonuses; all for political grandstanding. Also, how about monitoring all the other billions of dollars that have been loaned to banks and financial institutions?

Entrepreneurs can learn from this fiasco.

  • Never overreact to situations where there is employee dissatisfaction or customer or vendor complaints. Analyze the situation calmly before taking proper corrective action, instead of taking hurried actions due to external pressure.
  • If you do have a serious situation, do not create a smokescreen and divert attention away from it to hide the real problem.
  • Do not focus on the small or minor issues in managing your companies; focus on the larger or macro issues for greater impact. Let your management team manage the details.
  • If you need to make a statement or message regarding any irregularities in your company, do it for significant issues not trivial ones. If you mostly emphasize minor matters, your employees or going to be dismissive of such gestures.
  • Be sensitive to the message that you send with your actions. If you are being austere or are having cost reduction programs, do not have bonuses or spending that is contrary to the current environment in your company. Having incentives is not inappropriate, but make sure that they are related to the right objectives and are perceived positively.
  • Of course, when you are borrowing a lot of money, do not spend it on bonuses or management extravagance. If contractual obligations are involved, renegotiate those for the long-term financial health of the company and goodwill for all stakeholders.

While the above sound obvious, sometimes we tend to lose sight of reality and the negative perceptions that are created.

Ravi Patel

The Anticipation Begins

Barack Obama is our new President in a historic victory. What he and Congress will enact in terms of fiscal policies is eagerly anticipated. Entrepreneurs are especially anxious since new tax and employment laws might directly impact their businesses. Advance planning may be in order.

Ravi Patel