AIG Discloses $150 Million More in Retention Pay (Update3)
By Hugh Son
January 15, 2009
Jan. 15 (Bloomberg) -- American International Group Inc., the insurer bailed out by the U.S., is giving executives and employees at least $619 million in retention pay, $150 million more than previously disclosed.
AIG is spending the money to prevent about 4,200 employees from quitting, the insurer said in a document given today to U.S. Representative Elijah Cummings. New York-based AIG disclosed in a November regulatory filing that it was paying $469 million for at least 2,231 employees. That filing said there were other retention plans for subsidiaries without listing how many workers were included.
Chief Executive Officer Edward Liddy is trying to dissuade employees from leaving units that must be sold to repay the government. The U.S. rescued the insurer from collapse in September with a bailout that later expanded to $150 billion. Cummings, the Maryland Democrat who met with Liddy in Washington today, has said AIG downplayed the extent of the pay and that it's unnecessary to give so much cash when job markets are weak.
"My constituents who are losing jobs and homes don't understand why life should continue for these AIG executives as it did before the bailout," Cummings said in an interview.
AIG said it referred to the retention programs in the November filing.
"Ed Liddy clarified various details about those plans in answer to Congressman Cummings's questions," AIG spokeswoman Christina Pretto said in an e-mail. "It was a good, cordial meeting in which Mr. Liddy reiterated the company's commitment to repay the government loan."
After AIG got an $85 billion loan in September that saved it from bankruptcy, the insurer picked top executives to get retention payments and then asked them to help select lower- ranked employees who should also get the money, Cummings said.
Of the first 168 executives who are getting retention payments, only five have left, showing that the payments were effective, Liddy said, according to the lawmaker.
Liddy, 62, said on Nov. 25 that AIG will freeze salaries and eliminate 2008 bonuses for seven top leaders, and his own pay was set at $1 through 2009. For AIG's top 56 executives, total compensation in 2008 was almost 40 percent lower than the year before, Pretto said.
At least 30 AIG managers have defected to competitors since September, according to data compiled by Bloomberg. Zurich Financial Services AG, Switzerland's largest insurer, has announced at least six hires. More than 100 lower-level employees followed the managers to Zurich, according to a person familiar with the hires who declined to be identified because they haven't been publicly disclosed.
Pretto declined to comment on employee departures.
Click here to return to FBIC homepage