AIG’s Top Executive Threatens to Quit, Recants Over Executive Pay
Nov. 16, 2009 — Barely a month after receiving approval for an executive compensation package valued at up to $10.5 million per year, the newest chief executive officer of taxpayer-rescued American International Group (AIG) last week threatened to quit and later recanted over potential federal limitations on executive pay at firms rescued by U.S. taxpayers.
Robert H. Benmosche, AIG’s current chief executive and formerly the top executive at MetLife, last week reportedly threatened to resign his new position after President Barack Obama’s “Pay Czar,” Kenneth Feinberg, said he would limit executive compensation at corporations that accepted funds through the $700 billion federal Troubled Asset Relief Program (TARP), which was created last year during the economic meltdown and designed to relieve ailing corporations of their toxic assets, such as mortgage-backed securities, which were dragging them down into bankruptcy.
The Wall Street Journal last week reported Benmosche might step down after the AIG chief executive informed AIG’s board of directors he would resign from the position he accepted in August in light of executive compensation limitations recently announced by federal officials and after Feinberg had approved Benmosche’s $10.5 million pay package.
Benmosche reportedly cited potential problems retaining top executives with federally limited pay amounts when telling AIG’s board of directors he would resign last week, according to the Wall Street Journal, which cited anonymous sources. Benmosche allegedly clarified his comments later, telling board members he intends to stay on at AIG and telling employees he would “fight” on their behalf while continuing to work with Feinberg.
Feinberg in October ordered an average 50 percent pay cut for the top 25 executives at AIG and six other corporations that accepted taxpayer funds through the federal TARP program. Another decision is coming regarding the next 75-highest paid positions at the same seven firms.
Although Feinberg’s decision only applies to the remainder of 2009, executives at affected companies anticipate he will base 2010 compensation levels on the same criteria. Proponents say the scaled-back compensation amounts are justified for firms that would be bankrupt but for taxpayer intervention. But opponents say the reduced pay levels only punish people not responsible for current company woes and make it harder for struggling firms to get back on their feet and retain critical staff capable of finding jobs elsewhere – as well as make it more difficult for firms to repay their respective debts to U.S. taxpayers.
AIG officials last year accepted what has become a nearly $183 billion, taxpayer-funded federal rescue package after what formerly was the world’s largest insurer became its most indebted on bad bets tied to various mortgage markets. Federal officials approved the bailout funds for AIG and other firms to stave off what they claimed would be a devastating domino effect on global financial markets.