Could more jobs be saved if companies follow AIG's executive wage freeze?
It emerged this week that troubled insurer AIG is to drastically reduce the amount it pays its top executives. The decision was made in acknowledgement of the fact that it had received $153bn from US taxpayers earlier this year as part of a Government bail-out. The company said the measures included a $1 salary this year and next for chief executive Edward Liddy, as well as no 2008 annual bonuses, or 2009 pay rises, for the seven senior staff that make up AIG’s leadership group. Meanwhile, the insurer also announced that there would be no salary increases in 2009 for 50 other senior executives, who, in addition to having their pay frozen, would have restrictions placed on their bonus, severance and retention awards.
Liddy said AIG had a duty to taxpayers to restrict executive pay. “We are extremely grateful for the assistance we have received, and we know we have an obligation to use that assistance to help AIG recover, contribute to the economy and repay taxpayers,” he said.
It will be interesting to see if any other financial institutions that have been bailed-out by taxpayers follow suit. Perhaps the top brass at the leading UK banks that were saved by the Treasury could curtail the pay packages they award themselves. In fact, it’s a shame they haven’t already decided to do this – if they had, it may have led to some of the 81,000 jobs that were lost in the finance and business services sector in the first nine months of this year being saved.
But then again, why should the practice of limiting executive pay be restricted to companies that have received government bail-outs? In these times of economic hardship, it would be beneficial if the top executives at all major companies tightened their belts a little.
Many employees in the insurance sector are currently living with the fear that their jobs are on the line. In some ways, they are the lucky ones – thousands of insurance industry staff have already lost their jobs in 2008. As of August this year, the total number of redundancies in the insurance sector in 2008 stood at 6,000. The future also looks bleak for employees in many other industries.
If the top executives can manage to resist the temptation to pay themselves excessively large salaries, maybe some jobs could be saved in the coming months.
