According to Wikipedia, a conflict of interest occurs when:
An individual or organization (such as a policeman, lawyer, insurance adjuster, politician, engineer, executive, director of a corporation, medical research scientist, physician, writer, editor, or an individual or organization cited as a source) has an interest that might compromise their reliability. A conflict of interest exists even if no improper act results from it, and can create an appearance of impropriety that can undermine confidence in the conflicted individual or organization.The Times of London has a long piece on the AIG fiasco titled 'Joseph Cassano: the man with the trillion-dollar price on his head'. This portion caught by attention and is the first example of a conflict of interest:
In the final three months of 2007, AIG lost over $5 billion. Under the terms of the bonus scheme, top executives should have had their pay cut for poor performance. When the compensation committee met in March 2008 to award bonuses, however, the Essex-born CEO urged it to ignore the losses. The board approved the change, even though losses were growing by the month, and Sullivan pocketed $5.4m. He was also awarded a golden parachute worth $15m. He was out of the company three months later, with a severance package worth $47m (£31m). That is $39,500 (£26,000) for every day he was in charge. Pension funds and other savers holding AIG shares lost $58.4m (£39m) a day during his tenure.
So he could take all that risk knowing that if it all went awry he'd leave with plenty of money.
And for additional example, lets go back to the article:
Cassano’s division then imploded. As house prices fell, credit ratings were cut and bankers began to panic, AIG posted the biggest quarterly loss in corporate history: $61.7 billion. This is equivalent to losing $28m (£19m) an hour, every hour, for the final three months of 2008. But by now, the company’s problems were the property of the American taxpayer, creating extraordinary new conflicts of interest. Hank Paulson, the Treasury secretary in the outgoing Bush administration, was an ex-CEO of Goldman Sachs. He received tax benefits of about $200m (£133m) for taking on a government role. When the US decided to bail out AIG, the chief beneficiary of the rescue was… Goldman Sachs, which received $12.9 billion of public funds via the insurer. The new CEO, Edward Liddy, whose task is to wind down the company and to close $1.6 trillion in trades that are still outstanding from the Cassano era, is ex-Goldman Sachs. He even has $3.2m in the bank’s shares.Am I the only one who sees a parallel between the above and the story of the wolf in sheep's clothing?