Winston & Strawn partner Michael Melbinger, chair of the firm's employee benefits and executive compensation practice, appeared on Fox News March 19, 2009 to discuss the legalities of American International Group Inc.'s (AIG) generous bonus payments in the wake of huge losses and government assistance. It also offered advice for the future.
When asked about the legal aspect of congressional efforts to retract the reported AIG bonuses, Melbinger responded that it would "most likely" be unconstitutional. "The Constitution explicitly prohibits laws that interfere with the right of contracts. Article I, Section 10 of the United States Constitution says no state shall enter into any treaty, pass any Bill of Attainder, ex post facto, into law, or law impairing the obligation of contracts…If we want to go against the Constitution, we can, but what does that mean for the future of the United States?" said Melbinger.
The Fox News interview also focused on the pros and cons of giving bonuses to employees in the first place, usually for a good or great performance, not to "a company near disaster." Melbinger said that, while he does not defend all of the AIG bonus payments, he also does not agree with the way Congress is trying to recover them after the fact. He noted that "hitting" bonus recipients with the Tax Code is "the wrong way to do it."
Melbinger suggested that AIG be required in the future to make its executive compensation reasonable and avoid the appearance that it is "excessive." Such a prospective rather than retroactive remedy, would not only pass constitutional muster by upholding the right to contract, but would also help ensure that the key people needed to "operate AIG for the interests of the shareholders" and investors are still on the job.