AIG Seeks Federal Blessing for Another Round of Bonuses
Friday, July 10, 2009
American International Group is preparing to pay millions of dollars more in bonuses to several dozen top corporate executives after an earlier round of payments four months ago set off a national furor.
The troubled insurance giant has been pressing the federal government to bless the payments in hopes of shielding itself from renewed public outrage.
The request puts the administration's new compensation czar on the spot by seeking his opinion about bonuses that were promised long before he took his post.
AIG doesn't actually need the permission of Kenneth R. Feinberg, who President Obama appointed last month to oversee the compensation of top executives at seven firms that have received large federal bailouts. But officials at AIG, whose federal rescue package stands at $180 billion, have been reluctant to move forward without political cover from the government.
"Anytime we write a check to anybody" it is highly scrutinized, said an AIG official, who declined to speak on the record because the negotiations with Feinberg are ongoing. "We would want to feel comfortable that the government is comfortable with what we are doing."
The payments coming due next week include $2.4 million in bonuses for about 40 high-ranking executives at AIG, according to administration documents from earlier this year. Though the actual sum may have changed since then, the payments are much smaller than those that caused the upheaval in March.
Still, officials at AIG and within the government see them as a land mine.
Feinberg, who previously managed the government's efforts to compensate the families of those killed in the Sept. 11 attacks, has the power to determine salaries, bonuses and retirement packages for all executive officers and the 100 most highly paid employees at firms such as Citigroup, Bank of America, General Motors and AIG.
AIG's upcoming payments do not fall under Feinberg's official purview, as they involve bonuses delayed from 2008. Feinberg is charged with shaping only current and future compensation. As a result, some Treasury Department officials believe they are under no obligation to offer an advisory opinion in this case, which could leave AIG officials to decide the matter on their own, according to a person familiar with the talks.
In November, AIG's top seven executives, including Chairman Edward M. Liddy, agreed to forgo their bonuses through 2009. Then, in March, facing pressure from Treasury Secretary Timothy F. Geithner and other government officials, the company restructured its corporate bonus plans for the remaining top 50 executives. As part of this agreement, the senior executives were to receive half their 2008 bonuses -- which totaled $9.6 million -- in the spring, with another quarter disbursed on July 15 and the rest on Sept. 15. The last two payments would depend on whether the company made progress in revamping its business and paying back bailout money to taxpayers.
The exact range of the payments due this month to AIG executives was unclear in company disclosure filings.
AIG's proxy statement filed last month explains why AIG initially instituted the retention payments. The company stated that after the federal bailout began in September, "we needed to confront the fact that many of our employees, perhaps the majority, knew that their long-term future with us was limited, and our competitors knew that our key producers could perhaps be lured away. . . . Allowing departures to erode the strength of our businesses would have damaged our ability to repay taxpayers for their assistance."