American International Group, Inc. announced today it has adopted voluntary restrictions on executive compensation that eliminate management bonuses this year and set Chief Executive Edward Liddy's pay at $1.

The company said there will be no 2008 annual bonuses and no salary increases through 2009 for AIG's top-seven-officer Leadership Group; and no salary increases through 2009 for the 50 next-highest executives, in addition to other bonus, severance and retention award restrictions.

AIG spending has been under scrutiny since September when it gave the government a 79.9 percent interest in the company in order to stay liquid and obtain government loan guarantees now totaling $150 billion.

AIG said it is also developing a funding structure to ensure that no taxpayer dollars are used for annual bonus or future cash performance awards for AIG's “Senior Partners”–the top 60 members of management.

Mr. Liddy, AIG's chairman and CEO, said AIG's senior executives recognize AIG's obligation to taxpayers. “We are extremely grateful for the assistance we have received, and we know we have an obligation to use that assistance to help AIG recover, contribute to the economy and repay taxpayers.”

He added that, “This action by the senior management team demonstrates not only that we understand our obligation to taxpayers and shareholders, but also that we are committed to the future success of this organization.”

Under the voluntary restrictions announced today:

o Mr. Liddy, who joined AIG on Sept. 18, after the government support was arranged, will receive an annual base salary of $1 for 2008 and 2009. His initial compensation will consist entirely of equity grants, “showing his confidence in AIG and its team,” the company said.

o Mr. Liddy will not receive an annual bonus in those years, although he may be eligible for a special bonus for extraordinary performance payable in 2010.

o Mr. Liddy will not be eligible for severance payments.

o Paula Rosput Reynolds, vice chairman and chief restructuring officer, who joined AIG in October, will receive no salary or bonus whatsoever in 2008. In 2009 and beyond, other than her base salary, any other compensation she receives will be tied directly to the progress of the restructuring efforts.

o The other five members of AIG's top-seven-officer Leadership Group will not receive annual bonuses for 2008 or salary increases through 2009.

o AIG's Senior Partners will not earn long-term performance awards in 2008. They will not receive salary increases in 2009, and their 2008 and 2009 annual bonuses will be limited.

In addition to Mr. Liddy foregoing any severance payments, there will be restrictions on severance payments to members of this management group, which exceed government Troubled Asset Relief Program severance restrictions.

“We believe these actions demonstrate that we are focused on overcoming our financial challenges so AIG can return value to taxpayers and shareholders,” Mr. Liddy said.

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AIG Rules Out Management Bonus Goodies This Year

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