AIG Case Analysis Essay Example & Outline
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AIG Case Analysis
The American International Group (AIG) is a company that had its operations beginning in in 1919. Cornelius Starr started the company as an insurance agency in Shanghai, China. Having started in China, there is a notable expansion in the company in terms of its operations. This on the other hand led to the shift of the agency’s headquarters and as well having the ability to tap new markets (Cooper, 2006). During its initial years of operations as an insurance agency, the company’s management was under Starr. However, on 1962, there was the transfer of the management from Starr to Greenberg. After the transfer, there was an introduction of new policies.
These policies shifted the company from the original personal insurance background to a new high market corporate cover. With the new under Greenberg, there was more focus on selling of the company’s insurance packages through independent brokers (Cooper, 2006). This on the other hand had a high impact to the agents as they faced elimination in the company’s operations. More so, there was the elimination of the agent’s salaries in the company. Greenberg aimed at decreasing the company’s expenses. However, this move influenced the company’s sales negatively due to the elimination of the agents. Therefore, while considering the company (AIG), it is crucial understanding the start of the challenges faced in its operations.
A). Role-played by AIG’s corporate culture in the decisions made by employees and executives
Corporate culture, which refers to values beliefs and myths that companies develop over time, have a high influence on their performance and as well, their decision-making processes (Cooper, 2006). While considering to the case of American International Group, corporate culture played a great role in ensuring that the underwriters are knowledgeable. On the other hand, with the company’s corporate culture, sharing of knowledge from one staff to the other became free. With the free sharing of knowledge and ideas among the employees and executives, their decisions remain interrelated due and are able to work as a single company.
With the corporate culture in the company, there is a free interaction between workers in the company. This on the other hand gives talented employees to interact with their executives and as we other employees in the company. As a result, there is the creation of a positive work environment. This has a positive influence on decisions made by employees and executives pertaining their contracts with the company (Cooper, 2006). With the company’s dividends and bonuses (which is one of the company’s corporate culture), employees face a prompt of making decisions of remaining working in the organization. Therefore, it implies that the corporate culture of the company plays a great role in influencing employees and their executives while making their decisions in the organizations especially while interrelating with each other (sharing of ideas).
B). Ethical implications of the federal government bailing out companies such as AIG.
After the company received a bail out of $170 billion from the federal government, the company made plans of giving bonuses worth $165 to its employees. Having paid out to bonuses to its executive, the company developed some reluctance in paying back the loan from the federal government (Cooper, 2006). Some of the ethical implications continue on the company’s executives who engaged in unethical financial reporting and practices. This is according to New York Attorney general who conducted investigations on the officials. Despite the federal government’s bailout, the company is still in a transition. Its future remains undetermined after facing several years of financial problems. The company faces a responsibility of paying out federal loans.
Federal government’s patience on loan repayment remains as a determining factor on the success and stabilization of the company (Cooper, 2006). On the other hand, financial market stabilization also remains as a determining factor on the future of the company. However, since the government bailed out billion dollars to the company, it has an ethical implication of staying away from the company’s decisions since the company’s initial step of giving out bonuses to the company was not a crime.
Cooper, R. W. (2006) Research in Ethical Issues in Organizations Spitzer's Allegations of Unethical/Illegal Behavior: Has the Insurance Industry's Ethical Environment Really Changed Dramatically? New York: Emerald Group Publishing Limited.