Death of the Boondoggle Predicted (Film at 11)

Before the market went “splat” today, it seems that there was still quite a bit of grumbling floating around about AIG’s boondoggle for agents which took place after their bailout.  Quoting Business Insurance:

Sen. Baucus asked Mr. Bernanke to explain what controls over AIG management the Fed is able to exert and requested that answers be delivered to the Senate Finance Committee by Oct. 23.

The issue of the AIG retreat received a lively airing on Tuesday from lawmakers who blistered former top executives of the insurer at a Capitol Hill hearing.

"They were getting facials, manicures, and massages, while the American people were footing the bill," said Rep. Elijah Cummings, a Maryland Democrat on the House Oversight and Government Reform Committee.

Robert Willumstad, chief executive of AIG from June until he was replaced last month, told the oversight committee he was not aware of the retreat that included $200,000 in hotel rooms and $23,000 for spa services.

Now, when I help fill out those ever-lovin’ forms required by some states for even the most trivial insurance rate tweaks, it’s not uncommon for me to have to fill in answers to questions on “disallowed” expenses, like lobbying or excessive executive pay.

I can’t wait to see states start demanding accounting for boondoggles such as the one AIG was caught sponsoring.

To be honest, such an event isn’t necessarily “wrong”.  At the very least, such posh excursions are not uncommon in the industry, especially when it comes to rewarding valued agents and associates.  After all, they are rewards for folks who are supposed to be driving the success of an organization, and rewards are generally supposed to be nice.

However, a few of us are also familiar with rules like the “New York Times test”.  That’s an informal rule which can influence decision-making: if you do something, and it lands on the front page of the New York Times, how will it look and are you OK with that?  If you aren’t, consider revising your plans.

Apparently, having a boondoggle after the federal government has become a major investor in your parent company does not look good on the front page of the Times.  Plans probably should have been adjusted accordingly.