AIG asked to follow Goldman cost cutting lead
26 November 2008
New York attorney general Andrew Cuomo has raised some inconvenient questions for American International Group Inc. The insurer, which the US government bailed out, with a package of $150 billion, last week, has been asked if its top executives will receive bonuses or pay raises after it had to be bailed out.
Goldman Sachs Group Inc had a day earlier announced scrapping 2008 awards for its top executives.
Obviously, concerns regarding transparency in top executive pay packets have started weighing in after the huge bailouts. The New York-based insurer had to agree to halt severance payments to CEO Martin Sullivan and other top executives. It had to also cancel most of its planned conferences.
Meanwhile, Goldman, which has become the first US bank to forgo top executive bonuses, has become a model to follow for other bailout beneficiaries. AIG has been asked by Cuomo to follow the lead given by Goldman. According to Cuomo, top executives should take their share of the economic hardship.
AIG had last month agreed to freeze, at Cuomo's instance, $19 million compensation owed to Sullivan. Sullivan had been ousted in June following the subprime mortgage collapse that left AIG with record losses. It also withheld $10 million severance payment to ex-CFO Steven Bensinger on top of $600 million compensation it withheld to employees in a financial products unit that failed.
The insurer also withheld a $10 million severance payment to ex-chief financial officer Steven Bensinger and $600 million in compensation to employees in a financial products unit that caused much of AIG's losses.