The news that AIG CEO Robert Benmosche is thinking of leaving (now he says he’s staying; see update below) because he’s sick of dealing with those mean, mean federal regulators—especially the ones who want to cap his and his employees’ pay—raised two conflicting thoughts:
1) The federal government isn’t very good at running corporations.
2) Who the &%$#@ does Robert Benmosche think he is?
The first point is pretty obvious: If the goal here is for the government to extricate itself from its rescue of AIG at the least cost to taxpayers, then scaring away competent CEOs and other top executives probably isn’t the best policy.
But does Benmosche really have any business getting huffy over his treatment by the feds? Pay czar Kenneth Feinberg approved a $10.5 million annual pay package for him, and he knew when he took the job in August that he was going to be dealing with Washington a lot. It’s possible the threat to quit is just a negotiating gambit, meant mainly to free up some more maneuvering room for him. But it also speaks of a pretty staggering sense of entitlement.
To get a sense of just how much Benmosche feels entitled to, I went back through the proxy statements of his former employer, MetLife. Until 2000, MetLife was a mutual—that is, it was owned by its insurance policyholders. Benmosche led its transition to publicly traded company. I generally believe our financial sector could use a lot more mutuals (think credit unions, some insurance companies, and Vanguard), but I don’t know enough about MetLife to say with confidence whether the switch was good or bad for its policyholders and the rest of us. It was definitely good for Benmosche, though. These were his paychecks through the years:
1998: $3.475 million
1999: $7.362 million
2000: $9.250 million
2001: $8.653 million
2002: $8.405 million
2003: $7.674 million
2004: $9.056 million
2005: $16.572 million
2006: $19.357 million
I’m not certain I’ve nailed down every penny—I was trying to avoid double-counting his stock and stock-option grants and the payouts from those grants, so I didn’t add in the value of the grants except in his final year. When AIG hired him, it disclosed that he still owned 500,000 shares of MetLife stock (worth $17.7 million at today’s price) and 2.1 million options to buy shares (value unclear).
So the guy’s set. He has more than attained his Number. He could have easily gotten by on the $1 a year that his predecessor Ed Liddy was making at AIG. It’s understandable that he wanted more than that to lure him from retirement at his Croatian villa, but given the nature of the job he was taking—helping the nation at a time of need—there’s something really off-putting about the idea that he needs to make about as much as he did back at non-government-owned MetLife. Clearly, Benmosche feels entitled to it. That’s what CEOs of big financial companies make, he must think. But should they make that much? I’ll hand it off here to John Kay in today’s FT:
You can become wealthy by creating wealth or by appropriating wealth created by other people. When the appropriation of the wealth of others is illegal it is called theft or fraud. When it is legal, economists call it rent-seeking.
Rent-seeking takes many forms. On Europe’s oldest highway, the Rhine river, the castles on rocky outcrops date from the time when bandits with aristocratic titles extracted tolls from passing traffic …
America has a new generation of rent-seekers. The modern equivalents of castles on the Rhine are first-class lounges and corporate jets. Their occupants are investment bankers and corporate executives.
Make that first-class lounges, corporate jets and Croatian villas.
Update: Benmosche has written a letter to AIG employees (pdf), obtained by the WSJ, saying he’s gonna stay and “overcome this compensation barrier that stands in the way of restoring AIG’s value and allowing us to live up to our obligations to all stakeholders.”