Isn’t it ironic that the biggest player in the insurance industry found itself defending the concept of performance bonuses last week in front of a hostile Congress? We’re not talking a few hundred bucks in an envelope at Christmas, either; we’re talking huge, gianormous amounts. Ironic because insurance companies like AIG and Travelers scream to the tops of the highest skyscrapers in NYC when they see a salvage claim of ten or twenty grand for a job that only took a day, or even just a few hours. Outrage is a bitch when it goes the other way, huh guys?
As the anger and shouting about the AIG bonuses calms down, if feels like the entire country is taking a deep breath. Reasonable voices have pointed out that while it is outrageous to reward financiers during a period when their units have lost billions, performance bonuses paid to individuals as a reward for their success remains consistent with our values. Even more on point is the argument that using rewards as an incentive to entice the lucky recipients to find more ways to be successful is not only good for capitalists, but it makes sound public policy too – “We need these people with special skills…”
Has there ever been a better retention bonus contract written than the No Cure/No Pay Open Form? No seriously. The Open Form says “I will work on your behalf during this difficult time. If I do a good job, I expect to be handsomely rewarded.” When insurance companies sign employee contracts like that, it makes perfect sense to them and those contracts are defended all the way to a House Subcommittee. But when the owner of a yacht signs an Open Form, its outrageous! Piracy! Yeah right.
The outrage towards AIG isn’t really about the dollars, we all know corporate executives make a lot of money. The outrage was fueled by the knowledge that these sailors had actually steered the Titanic towards the iceberg. Rather than do something to mitigate the risk, the geniuses at AIG Financial Products receiving bonuses actually caused the problem in the first place. Now we are in the realm of ultra-irony – if there is such a place – because creating a dangerous situation so that you can collect the savior’s reward is the classic definition of piracy.
At least the rewards that modern salvors get under the concept of No Cure-No Pay require some degree of success.
Maybe we just need a new lingo. Boaters have been so conditioned to avoid the term salvage at all costs, and the underwriters just see a skull and crossbones on any page that says salvage. Here is an idea: take all your salvage forms and change the title to Hull Integrity Retention Bonus Contract.
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