By way of background, we posted this on November 27:
How can you give cash compensation to an executive, yet claim it is not a salary or bonus? You call it a “retention bonus,” No, I am not making this up.
Note that AIG chose to make this disclosure the day before Thanksgiving, selecting a time when it would attract the least notice. Not that it really matters. The talk about restricting executive compensation to bailout recipients has been just that, talk.
It turns out that AIG was less than forthcoming in its pre-holiday revelation, and is now having to admit to more bonus payments during a busier news period. Did AIG really not have a good count two weeks ago, or did it think it could get cute and not admit to the full scope of executive largess? Or perhaps it decided, not having gotten as much flack as it feared, to expand the program.
American International Group Inc., the insurer whose bonuses and perks are under fire from U.S. lawmakers, offered cash awards to another 38 executives in a retention program with payments of as much as $4 million.
The incentives range from $92,500 to $4 million for employees earning salaries between $160,000 and $1 million, Chief Executive Officer Edward Liddy said in a letter dated Dec. 5 to Representative Elijah Cummings. The New York-based insurer had previously disclosed that 130 managers would get the awards and that one executive would get $3 million.
“I remain concerned, as do many American taxpayers, that these retention payments are simply bonuses by another name,” Cummings said in letter responding to Liddy.
AIG, which received a U.S. rescue package of more than $152 billion, has been criticized for saying it will eliminate bonuses for senior executives while still planning to hand out “cash awards” that double or triple the salaries of some managers. The payments are designed to keep top employees at AIG while Liddy seeks to sell units and pay back the federal government, which owns 79.9 percent of AIG…..
Keeping the managers is necessary to maintain credit ratings and meet requirements in some reinsurance agreements, Liddy wrote. AIG disclosed the initial list of 130 managers in a September filing without saying how much most of the recipients will get. Another 38 people were added “subsequently,” according to Liddy’s letter, which didn’t disclose the new recipients or say when they had been added.
Yves here. What rubbish. Do you really think there are a lot of senior executive jobs on offer in the insurance industry these days? And have you ever heard of credit ratings being dependent on a particular manager staying in the saddle? CEOs get deposed without there being any ratings impact. This explanation comes perilously close to being a bald-faced lie. Back to the story:
The list was expanded so AIG can retain people with “key client relationships” and who have a high “degree of flight risk,” Liddy wrote.