What does the AIG Bonus issue tell us about HR?

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Permalink Reply by Cam Caldwell on May 6, 2009 at 9:41am

Mahesh:

The AIG bonus issue clearly communicates that HR was either ineffective at helping the Top Management Team protect its ethical position, or was asleep on the job. HR's role includes identifying values-based, principle-centered moral issues that affect internal and external perceptions of the firm.

A firm must recruit in the market place. For AIG to recruit successfully, the firm must be one that is highly regarded in the business environment. More importantly, AIG officers and board members who approved the decision to offer retention bonuses had the obligation to include language protecting the public interest -- and those officers and board members were the decision makers.

I have no idea how involved AIG's HR Team was in developing the idea for these bonuses. Whether they developed the idea or were simply aware of what was going on, they failed to identify the consequences of what eventually happened. Were they to blame? Of course! Were they the only ones to blame? Certainly not! But HR did not do its job!

Cam Caldwell

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Permalink Reply by Vijay Edward Pereira on June 14, 2009 at 4:56am

Mahesh-

It seems the AIG HR team did not have much of a say in most strategic decisions anyway. They were perhaps compelled to go with the bonus decisions for obvious reasons of keeping their own jobs. If we read the ‘post-mortem’ of the financial crisis this seemed to be the problem. Whistle-blowers were discouraged or ignored for fear of losing jobs or damaging careers when they reported several irregularities in the system. One CEO in fact said he was made aware but had to keep quiet as the business was making profit on paper. Hence my take is that HR was not empowered to either react leave alone oppose the bonus decision. Also bonus decisions for high management level people are taken at the Board level. HR are just administrators carrying this out

-Vijay Pereira

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