AIG Said to Offer Retention Payment to Bigger Group of Workers
By Hugh Son
Dec. 13 (Bloomberg) -- American International Group Inc., the insurer under fire for paying 168 executives not to quit after a government takeover, is giving retention awards to at least 2,000 more employees, according to a person familiar with the matter.
The “retention bonus” equals as much as a year’s salary and recipients were ordered to keep the payment secret, said the person, who declined to be named because the plan was labeled confidential. Awards were offered to as much as 10 percent of staff at businesses that are for sale, including plane-leasing and insurance units in the U.S. and overseas, the person said.
AIG said in September that 130 executives will get awards, just days after the New York-based firm got a government rescue package that now totals $152.5 billion. AIG Chief Executive Officer Edward Liddy told Congress last week the payments will go to 168 people, with some getting as much as $4 million.
“If it has the money to give these disguised bonuses to thousands of its employees, then I think it is time for Mr. Liddy to write a check to the federal government repaying the money it took,” said Representative Elijah Cummings, a Maryland Democrat, in a statement yesterday.
Nicholas Ashooh, an AIG spokesman, said life insurance unit chiefs were allowed to give retention awards to as much as 10 percent of their staffs, and selected “closer to 7 or 8 percent” of workers. There are about 37,000 employees in AIG life units around the world, Ashooh said. A typical payment is equal to about six months of salary, he said.
“It’s not a senior executive program, it’s for the employees running the businesses day to day, around the world,” Ashooh said yesterday. “We want to maintain the value of the businesses so we get the most value and repay the government.”
Ashooh said there “may be” retention programs for other AIG subsidiaries that are for sale. The insurer’s plane-leasing unit isn’t part of the life insurance program, Ashooh said.
Units that AIG is trying to sell employ about 70,000 people, which means that as many as 7,000 could receive payments, the person said.
Cummings said he felt deceived by the company. “Liddy told me in writing that his company was awarding 168 retention payments,” he said. “There is no way around that figure. I cannot imagine Mr. Liddy accidentally overlooking a few thousand employees targeted to receive these funds.”
Liddy is trying to sell AIG businesses to repay loans included in the government rescue which entitles the U.S. to a 79.9 percent stake. He said in a letter last week to Cummings that payments to executives are to help maintain the value of units for sale.
The insurer requires recipients to keep the payments confidential, according to a contract obtained by Bloomberg News. Exceptions included financial and legal advisers, as well as immediate family. If awardees tell other outsiders about the existence of the program, they will forfeit future payments, the contract says.
“All of our efforts with respect to our retention program have been made in the light of day,” Liddy said in the Dec. 5 letter to Cummings, who serves on the House Committee on Oversight and Government Reform.
Cummings has criticized the retention pay, saying AIG misled taxpayers who now own most of the company and that it’s unnecessary to give so much cash to retain people when job markets are weak. U.S. finance companies have announced 220,506 job cuts this year through November, placement firm Challenger Grey & Christmas Inc. said in a Dec. 3 report.
Assistant Treasury Secretary Neel Kashkari, who supervises the U.S. financial rescue program, has called some of AIG’s bonuses “excessive for a failing institution.”
In one instance, an AIG manager of an overseas unit told his superior that the payments weren’t needed because employees were unlikely to leave, the person said. The manager was overruled, said the person.
Most of the managers will get the first installment this month or in January and must stay through 2009 or early 2010 to get the full amount, the person said.
The 168 managers in the first round get awards of 100 percent to 300 percent of their annual salaries, the person said. Those payments were approved by an AIG compensation committee two days after the company’s Sept. 16 bailout, the insurer has said. That rescue included an $85 billion loan that saved AIG from bankruptcy, shortly after the government allowed investment bank Lehman Brothers Holdings Inc. to fail.
The insurer’s rescue package was expanded last month after continuing losses from credit-default swaps, the contracts protecting against losses on mortgage bonds, and other bets made on U.S. housing. The company has posted four straight quarterly losses totaling about $43 billion.
AIG, under pressure from lawmakers to limit executive compensation, said on Nov. 25 that Liddy, 62, will receive $1 in salary through 2009. The company said it will freeze salaries and forgo 2008 bonuses for seven top leaders.
To contact the reporter on this story: Hugh Son in New York at email@example.com
Sunday, December 14, 2008
The market is going to humble someone... absolutely disgusting is all I can say.
Posted byAmy Jamison at10:41 PM