There may be a way to obtain worse publicity for your company than treating a group to a lavish, half-million-dollar resort bash just days after accepting $85 billion worth of taxpayer money to avoid bankruptcy, but it's hard to imagine one.
Certainly the ex-leaders of insurer American International Group (AIG), who were grilled by the House Oversight and Government Reform Committee, Saturday Night Live, and every editorial page in the country for running a $443,000 program at the St. Regis Resort, Monarch Beach in Dana Point, CA, from Sept. 22-30,would have trouble imagining a worse one.
And, the fact that it wasn't an executive junket but an incentive program for independent insurance agents who outsold all their competitors—and that it helped drive sales whose profits likely exceeded the cost substantially—doesn't make it any bit better, said Bill Boyd, president and CEO of Dallas-based Sunbelt Motivation and Travel. "You'll never get your day in court on the ROI," said Boyd, past president of the Society of Incentive & Travel Executives. "It's not for the meeting planner to decide, but a CEO should say, 'We are accepting government money. Cancel everything.' If attrition would cost more, pay it."
Incentive industry braces for the fallout
"I am very concerned," said Fay Beauchine, executive vice president of global engagement and events at Minneapolis-based Carlson Marketing. "The right to reward employees for a job well done is different than executive compensation packages for failed strategies. Keeping employees engaged and happy is a good investment for the company and for the economy."
And yet, they are being penalized already. In a joint statement, AIG and New York State attorney general Andrew Cuomo announced that the insurer "agreed to immediately cancel all junkets or perks which are not strictly justified by legitimate business needs ... [including] more than 160 conferences and events, some exceeding more than $750,000 per event."
This specifically includes a $750,000 "best operator" conference in Las Vegas, a half-million-dollar conference that was to have been held last month at the Ritz-Carlton, Half Moon Bay in California, and a $350,000 sales conference that was scheduled for this month at the Sea Island resort in Georgia. In total, more than $8 million worth of AIG conferences and events have been canceled. And, as Beauchine predicted, Cuomo's office pushed AIG's new leaders to make these cuts while eliminating or demanding the return of executive golden parachutes and bonuses.
"This will absolutely have an impact on the [incentive] industry," predicted Boyd. "Any conscientious CEO will look at [AIG] and say, 'Holy cow, we are not going to be in this position.'" Boyd added that he had one client, which held an extravagant cruise in Europe, say it is now staying domestic. That executive, Boyd said, wants to be able to face his shareholders.
Richard Gaeta, president of Marblehead, MA-based Premier Incentives, added, "We in this industry are not doing a good job of explaining the value of these programs as a marketing and ROI tool. During every downturn, this is the classic replay: the image that [incentive programs] are boondoggles. Anything that drives revenue is positive. That is the message we have to get across to Washington, to Wall Street."
This time, however, the incentive industry does have a response mechanism in place, or nearly so. The Incentive Federation recently brought a number of leading incentive companies together to form the Industry Leadership Council, with the charge of increasing industry outreach to both business and government.
Originally published Nov. 10, 2008