Greetings,
When I joined American General back in 1998 it was before we were merged with AIG, I thought highly of the company as a whole and supported their products and services. Now that we have gone our separate ways, I am going to write this blog based on knowledge I have gained from working for AIG. At the time of the merger AIG's stock price was $103, today it is worth $16.40. Why is that? Here is my theory:
When AIG merged with American General, AIG was the dominant party in the deal, though in retrospect of the shady book keeping that AIG did American General should have been the dominant company. However, there were too many executives that received a giant "golden parachute" to care who the dominant party was. AIG believes that outsourcing as many positions they can to cheap foreign labor would have no impact on their customers and would only increase their bottom line and executives bonuses. Looking at the stock today, anyone can see that the company is going through very tough financial times and they have nothing to blame but the leaders, past and present, for making poor choices frequently. Here is how the outsourcing has slowly chewed away at their shareholders and premiums.
Let’s start with stock price and number of shareholders. Every employee of AIG who had a 401K plan with them were matched with common stock, therefore every pay day a large amount of stock was purchased for these employees. As the outsourcing began they reduced staff, every time they did this there were less and less stock being purchased which reduced investor’s confidence.
Premium losses, how did this happen? Simply, the reduction of staff reduced the number of employees paying premiums to a company that is self insured. In working in the Group Benefits division I recall reviewing some of our clients pricing and as employees we paid more than most of our clients. It falls to the same theory as the stock price, less employees - fewer premiums.
One supposedly tough fiscal year, AIG stated there would be no increases to staff and we were under a hiring and wage freeze. Some people, whose manager felt they went above and beyond, were given stock options. I don't know about anyone else’s but I was given options at around $77 per stock. Today they are completely worthless.
What is the worst about the whole thing is that many capable, intelligent, dedicated persons were laid off so they could exploit some cheap labor in a part of the world where there is no HIPAA or SOX laws. Heck, there is barely indoor plumbing!
I think companies who outsource and want their company to flourish for years to come will end this practice and in reality Americans do want to do the job! Especially since the recent unemployment figures reflect the reasons our economy is in the toilet. Foreign workers don't pay American taxes!
To the outsourcing companies I have this to say. Instead of trying to churn out IT and Customer Service persons, why not invest in your own country's infrastructure and train people to be farmers, carpenters, plumbers, electricians, etc., this way you can feed and house your people!
