UPDATE: AIG Trustees Promise Swift Changes To Company's Board
May 12 2009 - 6:02PM
Dow Jones News
Trustees overseeing the government's nearly 80% ownership of
American International Group Inc. (AIG) are promising swift changes
to the company's board and pleading for lawmakers' cooperation as
the rescued insurance giant aims to formulate "a fair and effective
compensation system."
According to testimony prepared for a Wednesday hearing of the
U.S. House Committee on Oversight and Government Reform, the three
trustees will tell lawmakers they are actively seeking new board
members for AIG and plan to make an announcement regarding those
efforts shortly.
Echoing sentiments AIG Chief Executive Edward Liddy plans to
make at the same hearing, the trustees will urge Congress - which
in recent months has been heavily critical of AIG - to improve its
relationship with the company. "It is imperative that we continue
to support AIG's efforts for the additional reason that if we do
not, billions of dollars in taxpayer money could be lost," their
testimony reads.
While the furor has died down, AIG recently became the subject
of sharp criticism from Congress and the American public for paying
out millions in employee bonuses after receiving billions in
government aid.
Trustees in their testimony vow to ensure that compensation,
including bonuses, at AIG is addressed "in a thoughtful, prudent
and fair manner." A compensation policy designed for success is
crucial to ensuring that AIG isn't forced to sell certain entities
at fire-sale prices, the trustees will say.
The trustees also plan to defend their own roles, calling the
creation of their positions "a way to place the government's
interest in AIG in the hands of experienced individuals who could
act without risk of conflicts of interest" that could be posed by
more direct government involvement.
That assertion comes as the committee's ranking member Darrell
Issa, R-Calif., and other Republican committee members are
referring to the AIG trust as "an unregulated and unaccountable
entity responsible for $70 billion of taxpayer money invested in
AIG stock."
The three trustees selected to oversee the government's AIG
holdings are Jill M. Considine, a recent board member of the
Federal Reserve Bank of New York, Chester B. Feldberg, a recently
retired chairman of Barclays America and New York Fed veteran, and
Douglas L. Foshee, chairman and chief executive of El Paso Corp.
(EP) and chair of the Houston branch of the Federal Reserve Bank of
Dallas.
The trustees are protected from liability related to losses the
government could suffer as a result of its AIG holdings. That,
combined with "the AIG Trustees' ambiguous duty to act in 'the best
interests of the Treasury,' reduces confidence that the AIG
Trustees will act in the best interests of the taxpayers," the
oversight committee's Republican members maintain.
Those members on Tuesday exposed divisions within the committee,
publicly criticizing Democratic colleagues for not including them
in weekend interviews of AIG's trustees.
"I find this especially troubling since numerous assurances were
given that minority staff would participate in these interviews,"
Issa said in a letter to committee chairman, Edolphus Towns,
D-N.Y.
Issa said he is "deeply concerned that yet another breakdown in
cooperation between our staff follows a pattern of missteps and
miscommunications that ultimately harms our committee's ability to
conduct oversight."
-By Meena Thiruvengadam, Dow Jones Newswires; 202-862-6629;
meena.thiruvengadam@dowjones.com