How much is AIG really paying its executives?
Are we to believe AIG when it says it is reducing the amount it pays its top executives? Last month, the insurer announced that it would be making drastic cuts to the remuneration packages enjoyed by its senior staff. Among the measures AIG said it was taking was a refusal to pay 2008 bonuses to its seven-member “leadership group”, who would also be denied pay rises in 2009. However, the most eye-catching example of the company’s new policy of prudence was the decision to pay its chief executive Edward Liddy a salary of $1 this year and next.
AIG said at the time that its senior staff had a duty to accept smaller pay packages due to the fact it had been bailed out by the US government earlier this year with $153bn of taxpayers’ money.
However, there is considerable scepticism, particularly in the US, about AIG’s claims of a crackdown on bonuses. Indeed, Democratic congressman Elijah Cummings – who represents Maryland’s seventh district – said this week that large bonuses were still being paid to executives. How is AIG getting away with this? According to Cummings, the company is calling the extra cash “retention payments” rather than bonuses.
It was reported this week that, in a letter dated 5 December, Liddy told Cummings that 38 AIG executives have been offered cash awards of up to $4 million as part of a “retention programme”. It is understood that the extra payments range in size from $92,500 to $4m and have been offered to staff earning salaries ranging from $160,000 to $1m.
Liddy claims that the retention payments are necessary in order to ensure that the company keeps its top executives – his argument is that if AIG did not retain its high flyers, the insurer would be doing a disservice to the taxpayers that bailed it out.
Of course, this raises an obvious question: Why does AIG want to keep senior staff who were so spectacularly incompetent that the company had to go to the US government to ask for $153bn to stop the business from going under? It’s a question that is difficult to answer.
Last month, 500,000 US workers were laid off – the largest monthly total since the 1974 oil crisis. Yet, despite the fact that US lay-offs could, according to some analysts, reach one million per month by next spring, some staff at AIG are only willing to stay in their jobs if they are offered payments of $4 million. That’s in addition to their salaries. Nice work if you can get it.
