US Lawmaker 'Troubled' By Shift In AIG Pay Culture Since 2007
October 14 2009 - 10:36AM
Dow Jones News
The chair of a Congressional oversight panel said Wednesday he
was troubled by a shift in the compensation culture at American
International Group Inc. (AIG) that was detailed in a new
government audit.
Rep. Edolphus Towns, D-N.Y., chair of the House Committee on
Oversight and Government Reform, said that a new report formally
released Wednesday shows a significant shift in the way AIG
employees were compensated, with executives pulling in more
short-term rewards since 2007, when the company's losses began to
grow.
"The era of instant gratification had arrived at AIG," Towns
said in prepared remarks. "Long-term incentives were rejected in
favor of short-term gains."
The audit by Neil Barofsky, the special inspector general for
the government's $700 billion financial rescue plan, showed that
AIG employees were previously compensated more heavily with
long-term incentives they received only at retirement, Towns said.
But in 2007, executives "updated" their compensation packages with
shorter-term rewards, including the $168 million in retention
payments made to employees of the financial services division that
drew criticism from public officials last March. Since last
September, the government has dedicated more than $180 billion to
help bail out the insurance company.
AIG executives promised to repay $45 million of the retention
payments, but so far have only paid $19 million, according to the
report. Towns said that the panel would continue to monitor how AIG
and other bailed-out companies compensate their highest-paid
employees. Kenneth Feinberg, the U.S. Treasury's special master for
executive compensation, is scheduled to testify in front of the
committee in two weeks.
-By Kristina Peterson, Dow Jones Newswires; 202-862-6619;
kristina.peterson@dowjones.com