American International Group, Inc. (more commonly known by its acronym, AIG), has come under fire for issuing $165 million in bonuses, shortly after receiving upwards of $180 billion in funds from the federal government to keep the struggling insurance corporation from collapsing. (1)
Of course, it’s not alone. Mammoth retention bonuses are common in the financial services industry. Another bailout beneficiary, Fannie Mae, announced that four top executives would be receiving retention bonuses of $1 million or more. (2)
Without adding to the cacophony of voices criticizing AIG, Fannie Mae, or other instances of executive compensation run amok, I’d like to talk a little about how motivation works. Bottom line: it’s all about motivation. But does pay alone maximize motivation?