Business Ethics Now 3rd Edition by Andrew Ghillyer

Exercise 1

Your employer, American International Group (AIG), received almost $180 billion in federal bailout dollars in the belief that the collapse of AIG would have a catastrophic effect on the U.S. financial markets-the company was "too big to fail." Poor management choices had led the company to depend heavily on revenue from insuring investors against defaults on financial bonds backed by risky subprime mortgages (up to trillions of dollars of policy coverage). With the collapse of the housing market, investors filed claims on those insurance policies with AIG, and the company quickly discovered that it had insufficient financial resources to meet all those claims.

You are responsible for signing off on bonuses for AIG executives in the amount of $165 million, with the top seven executives of the company each receiving more than $4 million. News of the bonuses creates a public outcry over the payment of millions of dollars to executives who had driven the company into near bankruptcy. Supporters of the bonus structure at AIG argue that failure to pay the bonuses would result in the departure of senior executives to AIG's competitors. Is this a valid defense Why or why not