AIG May Double Some Salaries With Retention Payments (Update1)
By Hugh Son
Dec. 4 (Bloomberg) -- American International Group Inc., whose bonuses and perks drew fire from lawmakers after the insurer accepted a federal bailout, will make special retention payments that more than double the salaries of some senior managers, according to a person familiar with the matter.
Some executives in the group of 130 recipients will get more than $500,000 to stay through 2009, about 200 percent of their salaries, said the person, who declined to be named because the information hasn’t been publicly disclosed. An undetermined number of lower-paid employees will also get cash awards to dissuade them from quitting, the person said.
“It seems like more than what you’d need to pay to get people to stick around,” said David Schmidt, a senior consultant at executive pay firm James F. Reda & Associates. “Nobody’s hiring, so where are you going to go?”
Chief Executive Officer Edward Liddy is encouraging top employees at AIG subsidiaries to remain so the units retain their value while he finds buyers. The New York-based company is selling businesses, including its U.S. life insurance and retirement services operations, to repay loans included in a $152.5 billion government rescue of AIG, which produced a record $37.6 billion loss so far this year.
“We have to hold on to the talented people running our businesses,” said AIG spokesman Nicholas Ashooh, adding that many managers have lost much of their life savings. The executives “have deep business relationships that are not easily duplicated,” he said in an e-mail. “Our competitors have been trying to hire them for years.”
Ashooh said retaining the managers and keeping the units healthy “is in the best interest of both AIG and U.S. taxpayers.”
AIG disclosed the cash-award plan in a September filing without saying how much most of the recipients would get. The majority of the managers will get the first of two installments at the end of this month, said the person.
The awards may equal 100 percent to 300 percent of an executive’s annual salary, and as much as 100 percent for the next round of payments for lower-paid employees, the person said. The retention payments are several times larger than year- end bonuses, which most of the 130 executives will still get in March, the person said.
AIG said in the filing that the 130 payments included $3 million for retirement services chief Jay Wintrob. His award, almost 400 percent of his 2007 salary of $775,000, was the only one disclosed by AIG. While most recipients will get 60 percent of the money this month and the rest in December 2009, AIG said, Wintrob elected to get his first payment in April.
Lawmakers have criticized the retention pay, saying that AIG misled the public and that it’s unnecessary to give so much cash to retain employees when job demand is weak. Finance companies in the U.S. have announced 220,506 job cuts this year through November, employee placement firm Challenger Grey & Christmas Inc. said in a Dec. 3 report.
Liddy, 62, said on Nov. 25 that AIG will freeze salaries and forgo 2008 bonuses for seven top leaders, and his own pay was set at $1 through 2009. The next day, the insurer disclosed that Wintrob will still get the $3 million payout.
AIG also said the next 50 highest-ranked employees wouldn’t get raises through next year, and that it would ensure that bonuses and cash performance awards to the top 60 members of management didn’t come out of taxpayer funds. Their 2008 and 2009 bonuses would be “limited,” AIG said in its statement, without specifying the curbs. AIG said its curbs were stricter than federal rules for companies that accepted Treasury cash.