NU Online News Service, Dec. 11, 2:12 p.m.EST

Under a new Treasury ruling, American International Group'shighest paid executives have a cash salary limit of $500,000.

Other additional forms of compensation for the executives,heavily weighted toward stock payments, would be tied to companyperformance under the ruling by Kenneth R. Feinberg the SpecialMaster for Troubled Asset Relief Program (TARP) ExecutiveCompensation.

It was Mr. Feinberg's second round of rulings on executivecompensation for those companies that received special funds underthe program.

AIG is one of four companies (Citigroup, General Motors and GMACare the others) that received the compensation determinationtoday.

For AIG, Mr. Feinberg issued compensation rules on the 26 to 100most highly compensated employees. He issued rules for the top 25compensated employees last month.

Under the rules cash salaries will be limited to $500,000 andall cash payments, including bonuses, are limited to 45 percent ofthe total salary. There are no cash guarantees.

The rest of the compensation comes in the form of stock tied tocompany performance. Fifty percent of that compensation must beheld for three years or more and the remainder in long termstock.

There are clawback provisions if the bases of the incentiveawards prove "illusory."

According to the rules, published on the U.S. TreasuryDepartment's Web site, the incentive compensation for theseemployees "cannot exceed a specified percentage of AIG's eligibleearnings, which will be determined by AIG's Compensation Committeeand may be reviewed by the Special Master."

"The total compensation payable to AIG employees is weightedheavily toward long-term structures that are tied to AIG'sperformance and are easily understood by shareholders," Mr.Feinberg said in a letter to Robert Benmosche, president and chiefexecutive officer of AIG. "As a general principle, guaranteedincome is rejected."

The covered employees are also "prohibited from engaging in anyhedging, derivative or other transactions" that could "underminethe long-term performance incentives created by the compensationstructures."

Mr. Feinberg rejected an AIG compensation proposal that includedguaranteed cash payments.

A spokesman for AIG said the company declined comment.