AIG Current Issues Pertaining to Business Law

AIG (American International Group Inc) has most recently been a common feature on American as well as international headlines following its possibility of going into liquidation as a result of financial difficulties. The federal government bailout extended to the company to help it in reviving its activities has also been a topic of discussion.

Following all these, issues related to business law have been a common occurrence as AIG fights legal battles and accusations from enraged customers demanding their investment monies. AIG has as a result lost clients, employees and business in general. This paper focuses on these and other current events pertaining to business law at AIG.

Analysis

AIG was recently faced with an economic downturn as a result of the current economic crisis. AIG is said to have made losses worth $62 billion in the fourth quarter of 2008 (Sorkin, 11-14). As a result, it has not been able to pay its credit dues on time.

Creditors are constantly knocking on AIG’s doors to obtain their money as they fear that the company could fail to pay them under the current financial difficulties it is experiencing. AIG has resulted in selling its assets in order to meet its obligations to creditors and beginning 2008 it obtained bailout from the government.

Following the government bailout, AIG is no longer a wholly private company. The majority shares of AIG are now in the hands of the government hence it expects to receive more government control.

AIG traded 79.9 percent of its shares for the federal government bailout. The government now possesses the rights to suspend dividends to the previously common and preferred stock.

This is an indication that the company has ceased from being a fully private company to a nationalized one. It therefore owes the citizens who are represented by the government to operate profitably as well as repay the loan advanced by the government from the tax payer’s money.

As a result of the government bailout, AIG has to adjust itself to the government’s requirements and laws that have been set for companies obtaining bailout.

For example, The House of Representatives passed a requirement that all companies receiving federal government bailout exceeding $5 should pay 90 percent on bonuses given by companies. The companies must also operate with positive net value so that they can be able to pay up the loans advanced. If this is not so, the government will force companies that cannot pay up into liquidation Mich, 23-25).

AIG has been under scrutiny following the handsome benefits that were issued to its more than 400 employees in the financial products division ranging between $1 million and 6.4 million. This follows the fact that AIG received $170 billion as federal government bailout which has necessitated investigations on how AIG was spending the taxpayer’s money.

(Turkish Weekly, 22-29). The government owns 79.9 percent of AIG now and as a result the public is the major shareholder of the company and this is what has created a major uproar in the public about AIG’s activities. There are claims that the company is not taking its responsibilities towards shareholders in a serious manner.

Edward Liddy, AIG’s chief executive officer told the congress in March, 2009 that the company had asked the employees to return half of the bonuses received (Sorkin, 19-23). Further, he argued that the reason for the hefty bonuses was an attempt to retain employees in the financial products division.