The "AIG Effect" and Corporate Travel

On Feb. 3, Wells Fargo canceled a four-day event for employees at the Wynn Las Vegas after public outcry, mainly because Wells Fargo received $25 billion in government bailout money. This week, Wells Fargo took out a full-page ad defending its right to recognize its employees. (Morgan Stanley canceled a Monte Carlo trip for its employees, too.)

Obviously Wells Fargo and others are misunderstanding the current business climate. Congress and taxpayers are scrutinizing how banks spend their government bailout money and won't be silent about lavish spending. It's called the "AIG Effect," named after how American International Group Inc., only days after receiving an $85 billion cash infusion from Congress, spent $440,000 on an excursion at a luxury resort. Now, it seems, frivolous travel spending is out and most companies -- even ones not affiliated with banking -- have gotten the message. It's tacky to spend a lot of money during a recession. (All corporate travel hasn't disappeared. The beneficiaries of the new corporate travel are smaller and less well-known hotels, restaurants that can pare down costs and hotels near public golf courses.)

An Association of Corporate Travel Executives survey said 71 percent of its members planned to spend less on travel this year and planned to use teleconferences instead of corporate retreats. Not surprisingly, the new policy has caused some problems for the travel industry. The Las Vegas Convention and Visitors Authority said last week that "it is unfair to punish an entire industry that generates billions of dollars in economic stimulus and jobs for the American public."
While Sin City reeks of excess, other parts of the country are excited at the prospect of the new puritanism. The Philadelphia Convention and Visitors Bureau have started a $150,000 campaign, "Philadelphia - Serious Value for Serious Times." Sometimes it pays not to be synonymous with topless showgirls and gambling.