Has AIG Heard of the Word "Optics"?

When I was active as a corporate executive, we had many occasions when our financial situation was not going full steam. There were many times when we had to curtail spending and change policies mid-stream. I remember on many occasions debating with my colleagues whether or not first-class travel, high-priced meetings, and other such spending areas should be curtailed for everyone. The challenge I repeatedly set before our group was this: "what would be the optics of doing such-and-such?" How could we ask employees to cut back if executives still flew first class or had meetings at the Ritz? In fact, we changed several of our executive retreats from high-priced resorts to the Executive Suites, not only to save money, but also to send a message that it was the meeting and not the surroundings that were important.

With this in mind, I listened the other day to the CEO of AIG trying to explain to Larry King the rationale for having a training session for independent agents at a high-priced resort in Phoenix. He explained that training is important for these people to help them sell the right AIG product. He also explained that the company defrayed costs by having sponsors pay for much of the meeting.

I sat an listened and thought to myself: "these people just do not get it". It is a matter of optics. It was going to look bad and should never have been done. No amount of explaining this intellectually will negate the fact that taxpayer money has bailed out AIG and that they are playing at expensive resorts with our money. They may explain how important this was and how they got others to help foot the bill, but the question reamins: why didn't you go to the Executive Suites or Hilton? Couldn't the meeting have been just as well done there and for even less money? I know that they likely already had a contract and might not have been able to cancel, but cancelling and taking the financial hit might have made them look even better. In addition, a television news crew followed AIG executives through the airport trying to get comments. They followed them all the way to their plane through--you guessed it--First Class boarding. Tough times at AIG!!

I am starting to wonder whether it might be worthwhile to bring in outside directors onto the boards of companies the government bails out. We are putting money into companies that got themselves into trouble because of their own bad actions. Their boards were part of those bad decisions and to expect the same boards and same management teams to act more responsibly may be too much to ask. Perhaps the taxpayers need some representation on these boards--after all, we own the companies!