Kitchen Worker Gets AIG (NYSE:AIG) Retention Bonus

AIG (NYSE:AIG) is a meritocracy. One of the firm’s best kitchen workers got a $7,70o retention bonus as part of the firm’s plan to keep key employees. According to the FT, the payment was made in March.

Kenneth Feinberg, the government’s pay czar is asking that AIG retention bonuses be cut by $198 million for 2010 and that the company “claw back” $45 million from last year.

The trouble with the plan is that some of the retention programs were probably part of written agreements with employees and the federal government may not want to be seen as violating contracts. It would raise the issue of whether employment agreements at firms which have still not repaid government loans are any good at all.

The pay czar may find that there is some resistance both from AIG workers and the legal community to honor past commitments. Some of the pay agreements may even go into court. If the pay czar loses in a dispute in District Court, if could severely undermine his future ability to regulate Wall St. pay.

As for the kitchen worker, Feinberg will probably not get that bonus back. It was probably already spent on a new car, a vacation condo, or a child’s college education.

Douglas A. McIntyre                                                                 Read 24/7 Wall St.’s Most Important Market Rumors of the day