AIG restricts exec compensation, CEO gets a dollar… video
Posted by tothewire on November 26, 2008
(CHARLOTTE, N.C.) American International Group Inc. said Tuesday it is limiting how much it pays its top executives, including granting a $1 salary for this year and the same for 2009 to its Chief Executive Edward Liddy.
The decision is one of many broader moves made by the troubled New York-based insurer, which has been under pressure to restrict executive pay since accepting billions in government assistance to save it from collapse. AIG has received about $150 billion so far, more than any other company.
It was once the world’s largest insurer with customers around the globe, and regulators feared the possible effect an AIG collapse would have had on the world’s financial system.
The company said there will be no 2008 annual bonuses and no salary increases through 2009 for AIG’s top seven officers and no salary increases through 2009 for the 50 next-highest AIG executives. In addition to his $1 a year salary, Liddy will be getting an unspecified amount of stock.
“We believe these actions demonstrate that we are focused on overcoming our financial challenges so AIG can return value to taxpayers and shareholders,” Liddy said in a statement.
AIG shares fell 4 cents, or 2.5 percent, to $1.73 in afternoon trading.
The announcement comes after New York Attorney General Andrew Cuomo sent a letter to Liddy earlier this month saying AIG should be “completely transparent” about its compensation plans for 2008.
In mid-September, the Federal Reserve said it would offer two loans totaling $123 billion to AIG to help the insurer stave off bankruptcy. AIG was later allowed to access another $20.9 billion through the Fed’s “commercial paper” program. And earlier this month, the government announced new financial assistance to the company.
On Tuesday, Cuomo applauded AIG’s decision to limit executive pay, and said other companies receiving federal bailout money should follow suit.
“It is only fair that top executives, who benefit the most when firms do well, should also bear the burden of the difficult economic consequences their firms now face,” Cuomo said. “The government is not writing blank checks to these companies.”
In a letter to Cuomo on Tuesday, Liddy said AIG is “extremely grateful” for the support it has received from American taxpayers, and said the company does “recognize the obligation we have to use that support to help AIG recover, contribute to the economy and repay taxpayers.”
Like other insurers, AIG has been slammed by deterioration in the credit markets amid concerns that complex, structured investments it insures will increasingly default. Its problems did not come from its traditional insurance subsidiaries, but instead from its financial services operations, and primarily its insurance of mortgage-backed securities and other risky debt against default.
AIG said no taxpayer dollars will be used for any annual bonuses or future cash performance awards for AIG’s top management positions.
Liddy, who joined the company in mid-September, will not receive an annual bonus this year or next, although he may be eligible for a special bonus for “extraordinary performance” payable in 2010, the company said.
When asked to comment on Liddy’s decision to take a $1 annual salary for the next two years, and be paid instead with equity grants, Cuomo expressed admiration.
“He’s putting his money where his mouth is,” he said. “If he performs, God bless him.”
It wasn’t immediately clear how much stock Liddy stands to get, but AIG spokesman Peter Tulupman more information would be disclosed in an regulatory filing with the Securities and Exchange Commission.
Earlier this month, AIG ended 14 voluntary deferred compensation programs, resulting in $500 million of payouts due in the first quarter of 2009.
The company said it made the move to prevent employees from having to leave to collect deferred pay. The old plans had been set up so that employees could defer pay voluntarily and collect it when they left AIG, no matter the reason.
Several struggling financial institutions have announced in recent weeks that they are canceling bonuses for top executives, including Goldman Sachs, the Swiss bank UBS and the British bank Barclays.
Cuomo has praised those moves and suggested that other Wall Street institutions should follow suit, especially those receiving federal bailout money.
AP Writer David B. Caruso in New York contributed to this report.
This entry was posted on November 26, 2008 at Wednesday, November 26, 2008 and is filed under Business, News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.