American International Group Inc., under pressure to limit executive compensation after a U.S. bailout, froze pay and scrapped bonuses for seven top leaders and said chief executive officer Edward Liddy will get a $1 salary.
The insurer’s next 50 highest-ranked executives will forgo pay raises through 2009, New York-based AIG said today in a statement. New York Attorney General Andrew Cuomo, who demanded last week that AIG disclose compensation plans, said the insurer took a “positive step” and called on other firms to follow.
Liddy is cutting costs after lawmakers and regulators criticized the insurer for bad bets that forced the insurer to take a taxpayer rescue that was almost doubled this month to more than $150 billion. AIG, crippled by losses tied to mortgages, follows Wall Street firm Goldman Sachs Group Inc. in limiting executive compensation after receiving commitments of capital from the U.S.
“It is only fair that top executives, who benefit the most when firms do well, should also bear the burden of the difficult economic consequences their firms now face,” Cuomo said today in a statement. “Taxpayers have been slammed with a one-two punch, seeing their investments dwindle while simultaneously having to fund the Wall Street bailout.”
AIG shares have declined about 97 percent this year. The insurer slipped 7 cents to $1.70 at 12:11 p.m. in New York Stock Exchange composite trading.
Show of Confidence
Liddy, who was appointed by the government in September after AIG agreed to hand over an 80 percent stake to the U.S., will collect the $1 salary through 2009 and an unspecified number of equity grants that “show his confidence” in the insurer, the company said. Liddy will also be eligible for a bonus in 2010 and won’t get any severance.
“We understand our obligation to taxpayers and shareholders,” Liddy said in the statement.
His compensation at Allstate Corp. in 2006, his last year as CEO of the insurer, was $24 million.
Liddy’s predecessor, Robert Willumstad, rejected a $22 million severance package after leaving AIG in September. Willumstad had to step down as one of the conditions for AIG to receive government help. Martin Sullivan, who was forced out in June, received 2007 compensation valued at $14.3 million, a 32 percent decrease from the year before as profit dropped on writedowns tied to the housing slump.
Bad Trips
Liddy previously agreed with Cuomo to freeze $19 million due to Sullivan and $600 million in compensation for other executives. AIG also agreed in October to immediately cancel trips for conferences after the company was criticized for spending $440,000 to send employees to a resort days after the bailout.
Liddy had been working without a salary or other compensation, spokesman Nicholas Ashooh said last week.
“You could say it’s been both thankless and payless so far,” he said Nov. 18.
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