Case 37: American International Group (AIG) and the Bonus Fiasco Synopsis: In September 2008 American International Group started to fall under the financial crisis in America. The United states enter in a recession in the beginning of 2008 but it didn’t hit until the end of that year. Then all big companies started falling and going bankrupt. They decide to help stop the collapse of the America economy by presenting a bailout package of companies in need. The government created a 750 billion bailout package for American companies that are going under.
Linkage of Case to Chapter Material This case focuses on the controversial $165 million in retention bonuses paid to employees of the Financial Products unit of the American International Group (AIG), a behemoth insurance and financial services company. In early 2008, employees in the Financial Products unit were asked to remain with the company through the unit’s shutdown and, essentially, to work themselves out of a job. To entice talented employees to stay and work through the shut-down, a contractual retention bonus plan was instituted. When the bonuses were paid in early 2009, controversy and outrage arose given that AIG was the recipient of a substantial amount of United States government bailout money under its Troubled Assets Relief Program (TARP). Amid this controversy, Edward Liddy, AIG’s CEO, requested the bonus recipients to return half of the bonus amount.
They were unsupervised during these overtime hours and reportedly were very productive. Paul, the production manager, began to enact policies to improve production efficiency and decrease cost. He called his supervisors together and told them to maintain stricter discipline from their employees, and if they failed to do so they would likely be replaced. This fostered antagonism toward the supervisors from employees. I (Pat) then called a meeting to announce that the plant you be moving to a 10 hour a day 4 day work week and that all overtime would now need to be preapproved by Paul.
(AP) Former Rite Aid Corp. chief executive Martin L. Grass was sentenced to eight years in prison Thursday for conspiring to falsely inflate the value of the company his father founded and cover up the scheme. Grass, 50, who headed up the nation's third-largest pharmacy chain in the late 1990s before being forced out in October 1999, also was fined $500,000 and given three years' probation for his role in a billion-dollar accounting fraud that sent the company's stock tumbling. Before U.S. District Judge Sylvia H. Rambo handed down the sentence, Grass apologized to Rite Aid, its stockholders and employees. "For the harm caused to them, I am truly sorry," he said. Grass was indicted by a federal grand jury two years ago.
Lehman Brothers file bankruptcy, Merrill Lynch was bought out by Bank of America, and AIG, an insurance company that sold insurance to investment banks to cover the downturn of investments, was on the brink of financial distress along with so many other failing financial institutions. Paulson, knowing that something had to be done to stop the fall of the economy, along with Bernanke & Geithner basically went to Congress and asked for 700 billion to bail out banks. This was the creation of TARP (Troubled Asset Relief Project). Paulson was asking Congress to approve a program the size of the entire federal budget (which took around 15 months to prepare) in just a couple of week’s time. All of the big banks participated in TARP.
RUNNING HEAD: AMERICAN AIRLINES American Airlines and US Airway’s Merger By Aveon Sims Strayer University BUS 508 Contemporary Business Professor Jean Fonkoua August 24, 2014 Abstract American Airlines has suffered tremendous profit losses over the last few years. The losses have been so great that the company filed Chapter 11 bankruptcy. The news for the Chapter 11 bankruptcy protection was a shock to many, considering the fact that they had enough money to operate and cover their losses through the following year. The merger indeed was a great decision on behalf of American Airlines. The merger itself was questionable.
For Yahoo!, they want to have people invest in their company again (over and above their competitors) and the changes that Marissa Mayer implemented has increased investments in Yahoo!. Given the recent negative publicity of J.P. Morgan Chase in these foreclosure cases (they have paid out nearly thirty five million dollars in damages to servicemembers whose homes they attempted to foreclose upon) this change is an attempt to not just right the wrongs that were committed, but to regain the trust of the American people with J.P. Morgan Chase as a major player in the mortgage industry (Levitin,
Henning 1 Roberta Henning Tammy Berberich Written Communications 14 April 2009 The Rise and Fall of Bernie L Madoff With economy the way it is now, our investments are more important than ever. Most people invest their money in the stock market through their place of employment; others rely on word of mouth as to which investment firm is the smartest way to go. Do we really know whom to trust? Is “word of mouth” reliable? Bernie L Madoff, of Bernie L Madoff Investment Securities, LLC, succeeded in fooling the SEC (Securities & Exchange Commission) and gained the trust of hundreds of investors for so many years with a fraud known as the Ponzi scheme.
In 2008, the souring economy hit Whole Foods rather hard. Sales increases at Whole Foods stores open at least one year rose only 0.8 percent in 2008 versus 8.2 percent in the previous year. In August of 2008, Whole Foods announced that planned new store openings for 2009 would be reduced. Whole Foods had to back out of signed leases or revise the lease terms of 70 new stores that had been scheduled to open in 2009 and 2010. Whole Foods recently arranges to sell $425 million of preferred stock to private equity investors, which equated to an ownership interest of 17 percent in the event the private equity investors exercised rights to convert their preferred stock into common
Between the “Black Tuesday” and November thirteenth over 30 billion dollars had disappeared from the American economy. It took nearly twenty-five years for many of the stocks to recover. It caused many banks to fail which led to failed businesses and loss of jobs as well as the start to the Great Depression. Occupy Wall Street—started on September 17, 2011 in New York City’s Wall Street financial district—represents a real anger in the country caused by the effect of oppressive student loans, massive debt, lost jobs, and ultimately lost hope in the nation and economy. The main issues are social and economic equality, greed, corruption, and the excessive influence of corporations on government.