|AIG spent $440,000 on a company event at the St. Regis resort in Monarch Beach, Calif., last week, including $23,000 for spa services. (Chris Carlson/Associated Press)|
AIG ends spending for offsite meetings
CEO's decision comes after political outrage
NEW YORK - American International Group Inc., the insurer that pledged to curb spending after hosting a $440,000 gathering following an $85 billion federal bailout, said yesterday it will cancel most of its planned meetings and conferences.
AIG chief executive Edward Liddy "ordered the immediate cancellation of all outside meetings, conferences, and recognition events across AIG, except those that are required by law or that are deemed absolutely critical to sustain our ongoing business needs," spokesman Nick Ashooh said in an e-mail.
Canceled was a conference at the Ritz-Carlton in California's Half Moon Bay "after a reevaluation of the costs under the new circumstances," said spokesman Joe Norton. Senate Finance Committee chairman Max Baucus yesterday demanded more details from the Federal Reserve on AIG's event last month, including "who we can fire."
"This kind of behavior is an insult to taxpayers," the Montana Democrat wrote in a letter to Fed chairman Ben S. Bernanke. He asked for a response by Oct. 23.
Events such as those hosted by AIG to reward top salesmen are common at financial firms. Wachovia Corp., the lender about to be acquired after losing $9.5 billion this year, until yesterday had planned to send 75 top brokers and their spouses on a Greek cruise. The bank canceled it yesterday, citing sliding financial markets, said bank spokesman Jim Griffin. The trip was reported yesterday by the Los Angeles Times.
"Incentives for sales departments have proven over time that they work, and that's true in every business that depends on the selling effort," said Dean Bare, managing director of Stanton Chase International, an executive search firm. "If these trips didn't work, they would have stopped doing them a long time ago."
Even so, perceptions matter, said Heather Elms, a business professor at the Kogod School of Business at American University in Washington. "Whether the company's behavior is wrong on an absolute basis doesn't really matter right now," she said. "It seems that they're being viewed as behaving unethically."
AIG's event next week aimed to "motivate and educate" about 150 independent agents who sell AIG coverage to high-end clients, spokesman Nicholas Ashooh said Wednesday. The insurer hosts similar conferences "around the world all the time," he said, to reward self-employed agents.
Ritz-Carlton spokeswoman Vivian Deuschl declined to say how much AIG would pay to cancel. Companies typically forfeit a deposit of half the estimated cost of a conference if they cancel close to the date, said Anne Bodnar, who organizes similar gatherings for financial clients for Intermarket Communications in New York.
AIG disclosed the cancellation policy a day after striking an agreement that will enable it to access an additional $37.8 billion from the Federal Reserve Bank of New York. Liddy told Treasury Secretary Henry Paulson Wednesday the company will rethink expenses.
White House spokeswoman Dana Perino Wednesday called "despicable" expenses from the St. Regis event. Those costs included $23,000 for spa services, according to Representative Henry Waxman, chairman of the House Oversight and Government Reform Committee.