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AIG CEO threatens to quit over pay cut
by Jaspreet Kaur - November 11, 2009 - comments
Too much of interference by the government regarding the payment of employees has forced Benmosche to think about resignation
New York, November 11 -- According to a latest report, Robert Benmosche has threatened to resign as the chief executive of insurance giant American International Group (AIG) (NYSE:AIG), just three months after being appointed as the head of the insurance company that had recently received billions in government aid.
Benmosche, a former MetLife Inc. CEO, is AIG’s fifth chief executive officer since 2005.
At an AIG board meeting held last week, Benmosche said that he was “done” with the job. However, he agreed to have second thoughts as the board members reacted shockingly to his decision.
Benmosche has reportedly expressed his dissent over the restrictions placed on AIG by the government after it bailed out the insurance giant last year.
He complained to AIG’s board about the constraints imposed by the government overseer Kenneth Feinberg, President Obama’s pay master, regarding the slashing down of salaries of a number of AIG employees.
Last month, Feinberg had recommended that companies given government aid should reduce total compensation for their top 25 highest-paid employees by 50 percent, on an average.
As a result of Feinberg’s recommendations, cash salary for 12 of AIG’s top executives was reduced by a whopping 91 percent.
The new plan
When the recession hit the country last year and took almost all major companies by storm, AIG, too, had to face the music.
So the U.S. government had bailed out AIG and saved it from collapsing by giving a loan bailout package worth up to $182.5 billion in exchange for an 80 percent stake in the insurance company.
AIG is one of the seven big companies that have been directed by the Treasury Department to cut down the salaries and bonuses of their top executives from this month.
According to the new plan, cash salaries for the top 25 highest-paid executives will not be more than $500,000 in most cases. Furthermore, incentives will be capped at $25,000 in almost all instances.
However, Benmosche feels that the payment constraints would prove to be detrimental for the company as they would drive away talented workforce.
AIG on road back to stabilization
The recent positive trends in the insurance business and stability in the credit and mortgage market have been very beneficial for AIG.
It was reported last week that AIG earned $455 million in the third quarter, which is a major improvement over the $24.5 billion loss that the company had previously suffered. This is the second profitable quarter in a row for AIG.