Agency Problems at AIG - Assignment Example

It is, however, important to analyze this reason for large bonuses. • The bonus is being taken from the taxpayer’s money through the Government bailout. Is it Ethical?• Which companies in this current slowdown are in a position for “executive bidding”?• Will companies actually hire executives who have a history of bad performance at their past organizations?

It is clear that the managers are working in the interest of their own rather than that of the shareholders and owners at large. The current financial crisis has led to increased motivation for executives to boost up their capital. The executives are supposed to work in the best interest of shareholders, but a variety of factors motivate them to behave unethically, but within the law for their own personal gains. One of the reasons is the focus on short-term goals, and objectives, rather than the long-term progress and performance of the company.

Factors such as Stock Options, High compensation levels, Bonuses on Stock price, and aggressive tax treatment of corporate perks encourage the unethical increase of capital.