AIG is planning to pay over $2 million to executives next week. There was some public backlash but I imagine there will be a lot more on the way. AIG is stuck between a rock and a hard place with bonuses it has previously promised.

According to CNN, AIG owes approximately $235 million in bonuses to employees in the AIG Financial Products division. This is the division that many credit as a major contributor to the various credit problems which have led to the recession.

This is a very bad position to be in for AIG. It appears contracts have obligated them to pay out over $200 million to executives in the Financial Products division. However, the public is not going to be happy with these payments. So will AIG choose to forgo the payments? If they do, there would likely be many lawsuits and a drawn out process. It could take years of this issue coming up and they could have to pay the same bonuses or even more at the end.

Either another PR headache or a legal nightmare. It will be interesting to see how AIG and the administration play this. Perhaps a voluntary reduction would be the best soltuion. All of the employees agree to receive a quarter of their bonuses, waive the right to sue, and the remainder goes back to taxpayers. Many people would hate to pay those bonuses but there are few solutions short of a compromise.