But, let's say that taxpayer's money was not involved at all. Why would the executives of a company that LOST $61.7 billion in a single quarter be giving out $165 million of shareholder's money to themselves as "bonuses"?
Since most shareholders in most large public companies are Moms & Pops who have a small number of shares in mutual funds and no effective voice, executives in major companies use the assets of these companies as their own personal slush funds and gambling casino chips.
There is absolutely no fiduciary responsibility to shareholders practiced by large corporate executives nowadays and that does more harm to the survival of American capitalism than the harm that every Marxist and socialist on the Planet can do.
Before somebody jumps in and accuses me of being "anti-capitalist", I will point out that the "capitalists" are the SHAREHOLDERS. Being a corporate executive does not make you a "capitalist". Being a corporate executive merely makes you a white collar proletarian who works for the capitalist shareholders.
Compensation of this sort is typical in the financial services industry. Notice that this is going to hundreds of employees, not just the top few executives.
In all likelihood AIG's losses are coming from old contracts still on their books, while the bonuses have to do with particular incentive targets individual employees met in their personal performances. Still, it wouldn't surprise me if the bonus contracts were poorly written and don't really account for the possibility of losses at the company.