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AIG Discloses Pay and Performance Details

Source: WSJ

Posted on 13 Apr 2010

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American International Group Inc. (AIG) detailed compensation and performance metrics for its executives in a filing Monday with the Securities and Exchange Commission.

The proxy filing from the heavily scrutinized government-controlled insurer provided some additional disclosures about the pay of senior AIG executives whose 2009 and 2010 compensation was determined by the U.S. pay czar.

AIG detailed some of the performance measures that were used to determine incentive awards for its Chief Executive Robert Benmosche and other top executives. The targets reflected the struggling insurer's unusual situation and its attempts to reduce risk at its derivatives unit while stabilizing its insurance businesses.

For example, Mr. Benmosche's performance was measured in part by his ability to stabilize AIG's "talent pool" and the company's ability to repay debt and avoid negative changes in its credit ratings. Goals for Kristian Moor, the CEO of AIG's Chartis property-and-casualty insurance business, included helping the unit avoid "the use of capital from AIG parent" and increasing its return on equity and operating income, the proxy stated. AIG said a board committee determined that its top executives "had substantially achieved or exceeded" their target performance levels, and received their target incentive compensation last year.

Mr. Benmosche, who joined AIG in August 2009, was paid a total of $4.1 million last year, comprising $2.7 million in cash and stock salary and a pro-rated incentive award of $1.4 million. His annual compensation package in 2010 remains the same, at up to $10.5 million for the year.

Mr. Moor's 2009 cash salary was cut from $1 million to $450,000 in November by pay czar Kenneth Feinberg's determinations, reductions that AIG "strongly objected to," the company said. During 2009, Mr. Moor received a large retention award and Mr. Feinberg approved a total pay package for him valued at $7.1 million, according to the proxy. His 2010 cash salary has been increased 55% to $700,000 and his approved annual package this year could reach $7.6 million, the filing added.

Most highly paid AIG executives have seen their 2010 cash compensation cut or frozen by Mr. Feinberg. Last month, Mr. Feinberg said overall 2010 cash compensation for a group of AIG's top earners would decrease 63%, or $22.2 million, from the prior year, though a handful of executives saw increases in cash salary from 2009. The giant insurer was bailed out by the U.S. government in September 2008 and is trying to repay nearly $100 billion in U.S. funds over the next few years.

Among those who experienced reductions in 2010 cash salaries were Nicholas Walsh, who oversees Chartis' international operations, and Rodney Martin Jr., an executive vice president in AIG's life insurance business. Mr. Walsh's 2010 annual cash salary rate was reduced to $475,000 from $650,000 in 2009, while Mr. Martin's 2010 cash salary rate was cut 45% to $495,000 from $900,000 last year, according to the proxy. Both will be paid more in stock salary this year from last year.

During 2009, AIG's board had 27 meetings, more than many corporate boards and more than the 19 meetings the board held in 2008.

The insurer kept compensation for its non-executive directors at mostly the same level as the previous year, paying them an annual retainer of $75,000 in 2009. Chairman Harvey Golub, who was elected last summer, received an additional annual retainer of $500,000 that was pro-rated for the months he was at AIG last year. In all, the 70-year-old received $224,420 cash from AIG last year and no stock or options. Earlier this month, the annual retainer for non-management directors was bumped up to $150,000. They will also get $50,000 in deferred stock units annually, the proxy said.

The Treasury Department this month elected two new directors to AIG's board after the company missed four dividends on preferred shares held by the government. AIG's board now has 13 directors, and the company asked shareholders to elect all 13 individuals in an annual meeting on May 12. The U.S. government has a 79.77% controlling stake in the company.