Pay Package for AIG Chief to Be Approved

The ruling would be the first of many pay decisions that Kenneth Feinberg will likely make in coming weeks.
The ruling would be the first of many pay decisions that Kenneth Feinberg will likely make in coming weeks. (By Charles Dharapak -- Associated Press)
  Enlarge Photo    

Network News

X Profile
View More Activity
By Brady Dennis
Washington Post Staff Writer
Friday, October 2, 2009

President Obama's compensation czar is poised to give his formal blessing to a pay package worth up to $10.5 million for the new chief executive of American International Group, Robert Benmosche, according to sources familiar with the matter.

The ruling would mark the first of many pay decisions that Kenneth R. Feinberg is scheduled to make in the coming weeks. He has the task of evaluating compensation for top earners at seven companies that have been among the largest recipients of federal bailout funds.

Feinberg's green light for Benmosche's pay package has been expected. AIG disclosed in August that Benmosche would receive an annual salary of $7 million -- $3 million in cash and $4 million in fully-vested common stock. The company said he also would be eligible to receive long-term incentive awards of up to $3.5 million each year. In its filing with the Securities and Exchange Commission, AIG wrote that Feinberg had "expressed approval in principle" regarding Benmosche's pay.

AIG and the Treasury Department declined to comment Thursday. Feinberg did not return calls seeking comment. The sources spoke on condition on anonymity because the decision has not been publicly announced.

Feinberg, who was named czar in June, has sole discretion to set compensation for the five top senior executives plus the 20 highest-paid people after them at each of seven bailed-out companies -- AIG, Citigroup, Bank of America, General Motors, Chrysler, Chrysler Financial and GMAC. Under the administration's initiative to curb excessive pay, each company also must receive his approval for how it pays the rest of its 100 most highly compensated employees.

Feinberg is no stranger to such controversial assignments. He oversaw the arduous process of determining compensation for the families of victims of the Sept. 11, 2001, attacks, as well as administering payments to the victims of the 2007 shootings at Virginia Tech.

Although his current assignment is certainly less grim, Feinberg seems to understand the thorny task ahead of him. If he approves pay packages that are considered by the public to be too generous, he'll be accused of kowtowing to Wall Street. If he proves too draconian in limiting pay, he could chase away talented employees and harm companies in which taxpayers have a hefty stake.

"I'm not sure there will be any type of result here that is going to be praised," Feinberg said this week during an address to the Chicago Bar Association. "Likely, I'll be criticized from both ends." Feinberg also said that he and the companies have worked very closely and in good faith to hammer out acceptable pay packages.

Benmosche, 65, took the reins last month, becoming AIG's fifth leader since 2005. He succeeded Edward M. Liddy, who had been appointed chief executive after the government's bailout of AIG last September. Benmosche had spent eight years at the helm of MetLife before retiring in 2006.

Benmosche endured criticism when he spent much of his first month on the job working from his waterfront estate in Croatia, where he owns a vineyard. He has held several town-hall meetings with AIG employees during his short tenure, including at the company's Manhattan headquarters and at AIG Financial Products, the Connecticut-based unit whose troubled derivatives contracts brought the company to its knees a year ago.

He spoke about his AIG pay package with at least one group of employees, according to records obtained recently by Bloomberg News.

"I've been very successful in my life," Benmosche said, according to Bloomberg. "I have more than enough money for my kids and for me and for my grandchildren and their grandchildren. But the money is about what I am worth, and what my job is worth to be your leader. And that sets the tone for all of you in this room."

Since the bailout of AIG last September, the government's total commitment to the company has more than doubled, to $182 billion. Liddy struggled in his initial plan to quickly pay back AIG's debt to the government by selling many of the company's assets. In early March, AIG reported a $62 billion loss for the fourth quarter of 2008 -- the largest quarterly loss by any company in U.S. history.

Benmosche has said he feels little urgency to sell off AIG's assets to repay the government, and that he would prefer to wait until markets improve. He also has said that he intends to rebuild the company's operating units and pay back the government's investment over time.


© 2009 The Washington Post Company

Network News

X My Profile
View More Activity