(Bloomberg) -- American International Group Inc. abandoned the use of credit-default-swap spreads (CDS) as a measure of long-term performance for its chief executive officer — a partial victory for activist investor Carl Icahn, who said the arrangement created the wrong incentives.
A long-term incentive starting this year will probably be based entirely on AIG’s total shareholder return relative to peers, the New York-based insurer said late Tuesday in a regulatory filing. Previously, CDS accounted for 25%.
Icahn complained in January that a tie between executive pay and CDS would discourage management from splitting the company. He called on the insurer’s board to end the linkand emphasize return on equity instead. AIG CEO Peter Hancock has said bondholders could be hurt by a breakup, a view echoed by credit analysts and ratings firm Moody’s Investors Service, which cited the potential loss of earnings diversity and scale.
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