Journalists really can’t catch a break. The daily tales of more layoffs, unpaid furloughs and magazine closings (including Portfolio, which ran a monthly footnoted column). But now there’s this: those darn journalists are responsible for the problems at AIG (AIG).
We’ll borrow a line from our friend, Jeff Matthews: we are not making this up! In both the 8-K and the 10-Q that AIG filed yesterday, they repeatedly mention how negative publicity and/or criticism were “adversely impacting” various parts of their business. Here’s a snip from the Q, which notes that the negative publicity has actually become a risk factor:
Adverse publicity and public reaction to events concerning AIG has had and may continue to have a material adverse effect on AIG. Since September 2008, AIG has been the subject of intense scrutiny and extensive comment by global news media, officials of governments and regulatory authorities around the world and segments of the public at large in the communities that AIG serves. At times, there has been strong criticism of actions taken by AIG, its management and its employees and of transactions in which AIG has engaged. In a few instances, such as the public reaction in March 2009 over the payment of retention awards to AIGFP employees, this criticism has included harassment of individual AIG employees or public protest affecting AIG facilities.
To date, this scrutiny and extensive commentary has adversely affected AIG by damaging AIG’s business, reputation and brand among current and potential customers, agents and other distributors of AIG products and services, thereby reducing sales of AIG products and services, and resulting in an increase in AIG policyholder surrenders and non-renewals of AIG policies. This scrutiny and commentary has also undermined employee morale and AIG’s ability to motivate and retain its employees. If this level of scrutiny and criticism continues or increases, AIG’s business may be further adversely affected and its ability to retain and motivate employees further harmed.
All told, the company mentions negative publicity in one form or another 18 times in the nearly 170-page Q. The word criticism is also sprinkled liberally throughout the Q. The earnings release attached to the 8-K mentions negative publicity twice.
But if AIG was really concerned about the negative publicity, maybe they wouldn’t include this sort of employment agreement in the Q. The agreement is with Edmund S.W. Tse, who announced his retirement in March, but will continue to serve as an honorary chairman. Granted, Tse is an AIG lifer, having started at the company in 1961. And the agreement, at least as far as these things go, isn’t especially gross since the annual consulting fee is only $250K (though we’re guessing some of that will be made up by the unnamed completion bonus that Tse will get when the Asian operations are sold or spun-off). There’s also this: Tse will get office space, administrative support, a car and driver, hotel accommodations, club memberships, and (here’s the cherry on top) first class travel between Hong Kong and New York.