More bonus pay at AIG
Troubled firm to distribute payments delayed from 2008
WASHINGTON – 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 company 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 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 the troubled insurance giant, whose federal rescue package stands at $180 billion, have been reluctant to move forward without political cover from the government.
The payments coming due next week include $2.4 million in bonuses for about 40 high-ranking corporate officers at AIG, according to administration documents from earlier this year.
Still, officials at AIG and within the government see them as a landmine.
Feinberg, who previously managed the government’s efforts to compensate the families of those killed in the Sept. 11, 2001 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. In November, AIG’s top seven executives, including chairman Edward Liddy, agreed to forgo their bonuses through 2009. Then, in March, facing pressure from Treasury Secretary Timothy 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.”
The Treasury declined to comment specifically about the bonuses due this month. In a statement, a department spokesman said, “Companies will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk taking and reward performance for their top executives. … We are not going to provide a running commentary on that process, but it’s clear that Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance.”