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16 Mar 2009

Everybody’s business

George Onisiforou

It now seems that for those big organisations receiving taxpayer bailout money from governments, economic troubles are the least of their worries; these companies have become increasingly vulnerable to reputation crisis, which can produce an even harder blow to their business.

The American International Group (AIG) is facing its own post-bailout reputation crisis. Last week the Washington Post reported the company’s intention to pay $US165 million in bonuses to financial products unit executives, following an already established retention pay plan. The company has received more than $US170 billion in taxpayer bailout money from the US government.

The bonus payments have produced a surge of heavy criticism from the US government, which is worried that news like this diminishes its own efforts to help companies like AIG in the public’s eyes. The public sees their own money being handed out to reward the executives that created the economic crisis in the first instance.

Faced with such a response, AIG is doing little to get information out there, and own the issue. For example, it is not clear whether these are actually commission payments for products sold, or just plain bonuses, yet all news reports suggest the second. The New York Times reports that the company’s only reaction so far has been a letter sent to US Treasury Secretary, Timothy Geithner. The company’s US website has no press release relevant to this issue.

AIG might have its reasons for a slow response, but the backlash suggests that from now on its actions are accountable to a larger number of stakeholders and expectations. When a business receives money from everybody (taxpayer bailout money) then it becomes everybody’s business.

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