Smooth move by the guys over at American General this week.
As first reported in the Orange County Register, executives and key producers of American General, the AIG subsidiary that all of us in the structured settlement business are familiar with, were seen at the 5 star ocean front St. Regis Monarch hotel this week living it up in typical insurance company style.
In case you haven't notice how much the world has changed, this expose was first reported by the ultra conservative OC Register and then picked up by The Wall Street Journal this weekend. You can expect this to circle the blog and media world quickly as tax payers and others register their disgust with this symbolic display of excessive spending at a time when the corporate parent of American General went to the government for a loan of $85 billion to stay afloat. A few thoughts on this entire story and observations going forward:
1. Obviously American General booked these rooms and this conference well in advance. As someone who has booked conferences for my own business, I am well aware that to cancel at a late date means you are spending the money whether or not you have the conference. Basically the American General guys were going to spend that money whether it went on as planned or if they decided to cancel it. It was a sunk cost.
2. In addition to the American General executives and staff that would attend, they no doubt had paid for a lot of agents airfare to attend and there were probably scores of other agents flying on their own nickel. That's how these deals typically work. To shut it down on short notice would have meant incurring the wrath of people, mostly key producers and sales people, who had pre-purchased tickets and now had to eat the cost or pay hefty change fees, or otherwise change long held plans.
3. To close down the event would have sent a very negative signal to the agents who sell American General product and raised concerns among their top producers at the exact time when the company, and the tax payers, need American General and all AIG subsidiaries to continue to make money and conduct business as normal. Signs of weakness or panic are not exactly good business practice at times such as we are facing right now.
4. American General IS a subsidiary of AIG and it IS making money. They run their own shop and conduct business with a great deal of autonomy and as such they need to continue to keep operations and appearances as normal as possible. If American General starts to act like a wounded, bleeding fish, the sharks will circle and we will be looking at a problem created by perceptions, not reality.
That said, and in full recognition of the reality of how these conferences are run, let me ask the guys at American General a question:
Exactly what the hell were you guys thinking in proceeding ahead with this event!!!
As a modest suggestion from a humble agent and business man, let me share with you how I think American General should have handled this, and likely during a different generation of leadership WOULD have handled it.
1. Cancel the event for the agents and staff and tell them exactly why. A brief letter or video podcast by American General President Matt Winter to the impacted executives, managers and agents along the lines of the excellent one he sent to all the employees when the AIG bailout was announced would have been a great start. Something along the lines " That the appearances of our company, its executives and agents meeting and partying at a 5 Star resort where rooms start at $500 a night is going to send a horrible message to the taxpayers, stockholders and the press at a time when our corporate good will can not afford to be squandered. While American General is strong and has a vibrant future, of which all of you will play a key role, we all recognize it is time for us to set an example, roll up our sleeves and rededicate ourselves to the mission and purpose of a great company like American General and that is to provide life insurance and annuities that deliver on our promise to be there when our policyholders need us." I guarantee you that it would have been accepted and understood, if not applauded by 95% of the people impacted.
2. With the now potentially vacant rooms at the splendid resort, put a call into the near by Marine and Naval bases and invite soldiers and their wives and families to enjoy the rooms for the weekend with the compliments of American General and as a thank you for their service to our country. You could have had a PR bonanza and been seen as a serious corporate citizen who appreciates what the US taxpayers have done to preserve your company and jobs, instead of creating this perception of a bunch of Marie Antoinette's or Nero's partying in the pinnacle of luxury while all around them people are losing jobs, homes and massive equity in their savings and retirement accounts.
Look, I completely get why they went ahead with this and the people running this company are not bad guys. However, the bottom line is the leadership of the financial industry that I work in and have been a part of for 30 years is exceptionally removed from their real purpose, which is to provide advice, assistance and guidance to every day American's and their families as to how to protect their homes, retirements, college funds and futures. To say that the insurance and investment senior management nationwide has a sense of entitlement and is detached from the ordinary world is a gross understatement.
What once was a profession where you were required to present a conservative, stable and responsible face to the world and in which actual adults who had served in wars, lived through depressions and worked their way through college ran things, has devolved into a sales and prospecting business where the company executives have staggering compensation and severance packages and sales representatives look for the best compensation and best trips and perks. I am not just pointing the finger at AIG and American General here. This is an industry wide problem and issue that has evolved over time to the point that the leadership is so numb to ordinary economic life and reality that they don't see the firestorm an event like this would create because it doesn't even dawn on them that it would be offensive to the vast majority of people in our country.
What is most telling about this story is that no one at American General had the required vision and maturity to realize that this was a spectacularly bad idea and bad timing given the situation of the company and the country. I'm not blaming the President of American General, trust me that poor guy has had a full plate all month and he probably didn't even know this was going on until two days before it occurred. His staff needed to speak up and raise the issue. However, it speaks volumes to me and to other citizens across the country, and this is going to seriously undermine AIG's attempts to emerge intact as company during this process. Analysts were stunned on Friday that AIG has already used over $60 billion of the $85 billion loan and now tax payers are stunned that this company continues to party on while the rest of America fears for it's jobs, homes and retirements.
They can rationalize it any way they want but American General and AIG couldn't have possibly screwed up any more then they did on this one. They reinforced the lingering belief in society that our leaders in government and business are utterly detached from the real world economically in much the way poor, moronic Marie Antoinette, when told the peasants were starving because they couldn't buy bread uttered the classic phrase, " Well, then let them eat cake."
Good job American General, you just made your job about 1000% harder then it had to be. I hope the time in California at the resort was worth it.