How A.I.G. Relates to Federal Agencies

This post, a guest entry by Howard Risher, a consultant and author on performance-based pay who's been of frequent help to me in understanding compensation issues, addresses some of the issues I raised on Tuesday.

The outrage over the AIG bonuses would seem to have important implications for the federal pay program. Every critic, including President Obama it seems, is in favor of using financial rewards linked to performance. Their criticism has focused on two issues: (1) the idea that any organization would award bonuses in a year when the organization’s performance was unacceptable and (2) the lack of evidence that the individuals performed well.

The critics and voters across the country have also reacted to the amounts. The payouts were staggeringly large. But the more shocking issue is the apparent recognition by the critics that the awards were not out of line with common Wall Street practices. It’s a different world.