AIG, Allstate & the UAW: the Great Contract Debate

[Ed. Note:  I have been looking for a way to channel my vitriol over the news that AIG wants to pay the guys who could arguably be blamed for the entire global economic meltdown $225 million in structured bonuses, and I'm hoping to do it through this post.  That said, don't fault me if I start yelling. ]

I love David Greising.   The Chicago Tribune and NPR business contributor seems to understand everything business, especially the stuff I don’t.  This morning, he took on AIG’s bailout apologist CEO, Edward Liddy, for going soft on derivatives execs after canning 6000 Allstate employees a few years ago, employment contracts be damned.  

Why, Greising asks, after pushing Allstate into a handful of class action lawsuits (two by the EEOC, even – that takes work) because he ignored the axed employees’ contracts, has the man brought in by the Bush Administration to clean up AIG dropped the broom?

Given his own history, Liddy’s explanation that his “hands are tied” because of the derivative department’s executive agreements is sad.  Can you imagine the media tsunami that would follow a class-action lawsuit on behalf of AIG derivatives executives for their bonuses?  It’s not even their salaries, it’s their #%*$@* bonuses!  …  [cough] sorry. 

Honestly, it’s like Wall Street and K Street are having a “who can sound more hollow” contest. 

Greising also points out that other ailing corporations, including Motorola and Continental Airlines, have worked out deals with their executives for pay cuts, bonus paybacks and the like.

And then there’s the big wrench in Liddy’s explanation – the United Auto Workers.  They, too, had a contract.  A few, actually.  But nobody – not the government, the union or the automakers asking for tax money ever questioned whether it could be renegotiated.

And that’s as it should be.

So what’s different about AIG?  How is it that, in the face of a furious public, following one of the biggest collective renegotiations in history, and with a proven executioner at the helm, this company can’t get out of paying millions in bonuses?

Is there a double standard among contracts for workers and contracts for executives?  Probably.  But Greising’s article proves that that can’t answer the whole question.  Honestly, I think the real problem here is a denial of workplace realities. 

When the auto industry was getting bailed out, one of the biggest arguments against giving them the money was that it would create a false sense of stability.  The employees and executives of the Big 3 needed to understand the dire straits they were in, and government infusions would keep that from happening. 

The same is clearly true at AIG.  Employees and executives alike simply don’t understand how close to the edge they are.  They want to pay bonuses to “retain talent”?  Talent? 

The department created confusing securitized investments that didn’t work.  Now it’s months away from being wound down, and they’re still paying to retain talent?  This is a group of people who need to feel their livelihoods are in jeopardy.  That’s why the UAW renegotiated their deals.  That’s why Motorola execs adjusted theirs, too. 

Employment contracts are only as good as the companies that agree to them.  Perhaps if AIG were suddenly small enough to fail (potentially, at least), its employees would find it in their hearts to discuss their compensation structures.

EFCA Debate @ Seton Hall Law School

I received an email from Michael Ricciardelli at Seton Hall that the law school is hosting a debate over the Employee Free Choice Act this Thursday, March 18.

The participants include two attorneys from the famously pro-management law firm Jackson Lewis, a solo practitioner repping unions, and the Organizing Director for the largest health care workers’ union in New Jersey.

Regardless of your particular flavor of EFCA Kool Aid, this one should be a good show.  If anyone is in Jersey this Thursday, check it out.  You can register on their website.

And, if you’re so inclined, let us know what you thought in the comments below.

Union Response to Obama’s Education Plan: Pass or Fail?

President Obama laid out his education reform plan yesterday, and a litany of organizations of educators and education reformers have already given their take on it.

The American Federation of Teachers President Randi Weingarten stated in a press release, “The AFT fully supports the President’s call for shared responsibility for education…”  A bold move, maybe, since many AFT locals disagree with the President’s view on merit-based pay.  Weingarten went onto state, “as with any public policy the devil is in the details.” 

One of the arguments against merit based pay is that rewarding teachers with more pay based on the achievements of their students is biased and unfair. Critics of merit based pay feel that many low performing schools won’t improve just by giving the teachers more money.

Their argument is that money is not the only problem when it comes to these low performing schools. Parental responsibility and involvement coupled with socio-economic factors are just some of the reasons the areas these schools are underperforming and no amount of money will fix these problems until a conscience effort is made by all in the education process (i.e., families, teachers, administrators) to “fix the system”.

Proponents of the merit based pay system feel that by rewarding teachers who strive to improve, not only their students test scores, but themselves professionally, schools will retain the best and brightest of educators, who, in turn, will improve the educational process in their schools.

One thing President Obama did not address with much detail yesterday was the controversial No Child Left Behind Act.  The NCLB has been a contentious issue since its enactment.  Many feel it requires teachers to “teach to the test”, and it disregards classes such as music, PE, and art.  As Obama gets settled and attempts to get the economy rolling again, a plethora of educators will be waiting to see what he does, if anything, with NCLB.