AIG’s Cost-Cuts Hit Executive Paycheques

AIG’s commitment to retrenching has reached executive paycheques—the insurer’s new CEO will only see a single dollar as compensation for 2008 and 2009.

Edward Liddy, who took the chief executive’s position in September, will receive initial compensation that “consist[s] entirely of equity grants, showing his confidence in AIG and its team,” according to a company statement released this week. Liddy won’t get any bonuses this year or next, but is eligible for a special bonus for “extraordinary performance” in 2010. The company’s other executives have also agreed to voluntary compensation restrictions, a move that will cut 2008 bonuses and 2009 salary increases for its top 7 officers, and freeze wages and restrict bonuses for the next 50 executives in the chain of command.

“We believe these actions demonstrate that we are focused on overcoming our financial challenges so AIG can return value to taxpayers and shareholders,” Liddy said in the statement. The company is also putting together a funding structure that will keep taxpayer dollars out of bonuses or performance awards for its senior partners.

Liddy also outlined the compensation changes in a Nov. 25 letter to New York state attorney general, Andrew Cuomo, who’d challenged the insurer on its payment practices. “We recognize the obligation we have to use that [taxpayer] support to help AIG recover, contribute to the economy and repay taxpayers,” he wrote. In a responding statement, Cuomo called the move “appropriate” and called on other Wall St. firms “to follow AIG’s step quickly.”

The compensation cuts come as AIG completed the $40 billion preferred stock sale– to the U.S. Treasury Department—announced earlier this month. The deal was part of a restructuring of its original bailout plan, which allows the company to pay off part of its $85 billion bailout loan.

This story was originally published by Canadian Insurance Top Broker.