AIG Cuts Pay of Its Top Executives
Wednesday, November 26, 2008
American International Group, recipient of a massive federal bailout, said yesterday that its newly installed chief executive will receive a $1 salary and other top executives will face restrictions on their pay.
The announcement comes at a time when AIG has been under fire for alleged profligate pay and executive perks, such as an October hunting trip for executives in England. Since receiving tens of billions of dollars in federal rescue funds, AIG's spending has been criticized by New York's attorney general and members of Congress.
The global insurer said yesterday that its chairman and chief executive, Edward M. Liddy, will receive only $1 in salary for this year and next year, collecting his compensation in other forms. Liddy, a former Allstate chief executive who the government tapped to run AIG in September, will receive unspecified equity grants.
In addition, in two years, Liddy could receive "a special bonus for extraordinary performance," the company said in a news release.
Since joining AIG, Liddy has received no pay, company spokesman Nicholas J. Ashooh said.
"So far the job has been payless and thankless," Ashooh said. "When he has to make a big decision, we kid him -- 'That's why he gets paid the big buck,' " Ashooh said.
New York Attorney General Andrew M. Cuomo wrote to Liddy last week, saying it "seems hard to imagine that AIG could pay significant bonuses or give raises to executives after the company has quite literally been bailed out by the American taxpayer."
Cuomo praised the steps AIG announced yesterday and encouraged other firms to follow its example. "The taxpayers of this country deserve nothing less," Cuomo said in a statement.
AIG's move evoked the spirit of the so-called dollar-a-year men who left jobs in the business sector to help manage the federal government during the two world wars.
"This action by the senior management team demonstrates not only that we understand our obligation to taxpayers and shareholders, but also that we are committed to the future success of this organization," Liddy said in a statement.
Paula Rosput Reynolds, who was brought in last month as vice chairman and chief restructuring officer, will receive no salary or bonus for 2008, the company said. In addition, five other top executives will go without 2008 bonuses or salary raises through 2009, and about 50 other senior executives will go without long-term performance awards in 2008 or raises next year.
It isn't clear to what extent the company's performance for 2008 would have entitled executives to bonuses.
The pay restrictions were announced despite AIG's stated concern about losing key employees. Last month, AIG decided to distribute $500 million of deferred compensation to thousands of workers to remove an incentive for them to leave the company.
The giant insurer got in trouble by insuring financial institutions and other investors against losses related to mortgages. Fearing that the company was on the brink of bankruptcy and that its collapse could trigger a meltdown in the financial system, the government in September agreed to lend it $85 billion in return for an ownership stake of almost 80 percent. Since then, the government has eased the terms of the loan and increased its support of the company to $152 billion.