WASHINGTON – The Obama administration’s “pay czar” has advised American International Group to scale back $198 million in bonuses due next March to employees at its troubled Financial Products unit as company and government officials try to avoid another public uproar over pay packages at the bailed-out insurance giant.
Kenneth Feinberg, the U.S. Treasury’s point man for compensation, has indicated he wants future retention payments reduced at the troubled AIG Financial Products unit, according to a new report from the special inspector general overseeing the government’s financial rescue program.
A public furor erupted earlier this year when AIG paid about $168 million in retention bonuses to employees at Financial Products, the unit whose complex deals nearly wrecked the insurance giant last fall. The same contracts that guaranteed those awards also promised similar payments in March 2010, and for months AIG has been scrambling to redraw those agreements in hopes of preventing another public debacle.
The report by special inspector general Neil Barofsky offers new details regarding retention payments to about 400 employees at Financial Products, which ranged from as little as 1 percent of an employee’s base salary to as much as 36 times base salary. According to the report, one file administrator received $700, while an executive vice president took home $4 million. A kitchen assistant got a $7,700 bonus, while a senior administrative assistant raked in $87,500.
At the height of this spring’s controversy, angry lawmakers grilled AIG’s chief executive, protesters demonstrated in front of the company’s headquarters and the House passed a resolution that would have taxed the bonuses at 90 percent. The Senate never signed on.
Under pressure, AIG executives vowed to try to reduce future retention payments by at least 30 percent. They also asked employees at Financial Products who had received more than $100,000 to return some of their bonuses. Employees pledged to repay about $45 million.
But according to Barofsky’s report, only about $19 million had been returned through August. Some employees have been waiting to see the outcome of ongoing negotiations between AIG, Feinberg and other government officials over future compensation.