American International Group has outlined a plan meant to retain and attract executives as it works to repay its obligation to the federal government, which owns about 80 percent of the company.
AIG will pay top executives with what the company is calling "long-term performance units" (LTPU)–a mix of AIG hybrid securities, or debt, as well as common stock, according to a filing with the U.S. Securities and Exchange Commission.
"AIG is committed to compensation practices that allow the company to attract and retain capable and experienced professionals and motivate them to achieve strong business results in both the short- and long-term," Mark Herr, an AIG spokesman, said in an e-mail. "The LTPU grants allow us to achieve these goals."
The combination of basing a portion of executive compensation on about 80 percent debt and 20 percent common stock is "designed to serve as a proxy for AIG's long-term value," the company said.
AIG stock was selling for $37.11 a share on June 24. Shares have been as high as $55.90 and as low as $8.22 over the last year.
The plan was previously approved, AIG said, by Treasury pay czar Kenneth Feinberg, who is leaving the post after taking a new role as overseer of a compensation fund related to the BP oil spill.
Mr. Feinberg had ordered salaries of the top-25 executives at AIG slashed by an average of one-third (see http://bit.ly/9JxpoP).
AIG Chief Financial Officer David L. Herzog, Chartis President and Chief Executive Officer Kristian P. Moor, Life Insurance Chief Operating Officer Rodney O. Martin Jr., and Executive Vice President Nicholas Walsh are among those senior executives in line to receive the LTPUs, according to the filing.
CEO Robert H. Benmosche will continue to be paid in cash and common stock based on his original agreement with the company, AIG reported.
The federal government has made $182.3 billion available to AIG via the Troubled Asset Relief Program to bail out the company after declining credit default swaps nearly sank the firm in 2008. AIG said it owed the government $101.6 billion as of March 31.
Treasury Secretary Timothy Geithner recently told the Congressional Oversight Panel that AIG is making progress in its restructuring efforts, but the federal investment in the company will likely result in "some loss." (See http://bit.ly/9vcmcz for more on that story.)
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