American International Group Inc. — the federal supplicant that is in the global spotlight for nearly every dollar it spends — voluntarily restricted its executive compensation. The move provides for a $1 annual salary for CEO Edward M. Liddy, no 2008 annual bonuses, and no salary increases through next year for the diversified insurer’s seven-member Leadership Group.
The pay moves also eliminate salary increases through 2009 for “the 50 next-highest executives, in addition to other bonus, severance, and retention award restrictions,” it said.
AIG said that, in addition, it is “developing a funding structure to ensure that no taxpayer dollars are used for annual bonus or future cash performance awards” for the group of 50 top management members known as its senior partners.
AIG had borrowed $83.6 billion from the Fed as of Nov. 12, including about $63 billion out of $85 billion provided through a revolving credit facility. The balance was from the governments’ securities lending program.
The U.S. government now owns about 80 percent of AIG.
Liddy said today that AIG’s executive team recognizes the company’s obligation to taxpayers. “We are extremely grateful for the assistance we have received, and we know we have an obligation to use that assistance to help AIG recover, contribute to the economy, and repay taxpayers,” he said.
In the case of Liddy, who joined AIG on Sept. 18, his base salary will be $1 for this year and next, and his initial compensation wil “consist entirely of equity grants, showing his confidence in AIG and its team,” the company said. He may be eligible for a special bonus in 2010, if there is “extraordinary performance.”
Earlier this month, AIG took the step of terminating 14 voluntary deferred compensation programs that involved 5,600 employees and independent agents and representatives. It will be distributing about $500 million in earned but deferred pay during the next quarter as part of the change. But employees no longer will be able to leave AIG for any reason, and still receive deferred pay. AIG terminated the deferred-pay approach “to remove the incentive for employees to leave in order to obtain their deferred pay,” it said at the time.
Also in recent weeks, the company named veteran finance chief Dennis D. Dammerman as a director. Dammerman, currently chairman of Discover Financial Services, lead director of Capmark Financial Group Inc., and a director of BlackRock Inc., is best known as a retired General Electric vice chairman, member of its corporate executive office, and long-time CFO.
“We believe these actions demonstrate that we are focused on overcoming our finiancial challenges so AIG can return value to taxpayers and shareholders,” Liddy said of the latest compensation restrictions.