NU Online News Service, June 30, 3:57 p.m. EDT

NEW YORK--American International Group shareholders at the firm's annual meeting voted down a proposal to have executives hold shares in the company until two years after their employment ended.

At the same session AIG Chairman and Chief Executive Officer Edward Liddy said the company's financial situation is "far more stable" than it was a few months ago, and added the company has an "excellent chance" to repay the federal government loans.

Another proposal that would have reincorporated the company in North Dakota and a third measure related to the calling of meetings was also rejected after opposition by the AIG board of directors.

A proposal put forth by AFSCME Employees Pension Plan would have required AIG executives to retain a "significant percentage of shares acquired through equity compensation programs" until two years following the end of their employment.

Arguing for the requirement, an AFSCME member said such an arrangement would ensure that executives focus on long-term, rather than short-term results, since they would have a stake in the company after leaving.

In a statement of opposition, the board argued that executive compensation restrictions have already been imposed by the Department of Treasury, and the company should keep its remaining flexibility.

The proposal to change AIG's jurisdiction of incorporation from Delaware to North Dakota, put forth by shareholder Mark Filiberto, would have given shareholders more rights, as North Dakota has stricter corporate governance standards, according to the supporting statement.

AIG's board opposed the measure, stating that Delaware is the most favored corporate domicile for corporations in the U.S. The efforts and expenses of reincorporating, the board argued, would be put to better use on the company's restructuring efforts.

Also defeated was a proposal that would have allowed shareholders to call special meetings that would apply to shareowners but not to management and/or the board.

All but one of eight company proposals passed the shareholder vote, including a 20-to-1 reverse stock split designed to boost the company's share price.

Speaking at the meeting, Mr. Liddy expressed optimism that the company will be able to repay its billions in loans from the federal government as some shareholders expressed dismay and called for accountability for past decisions.

Outlining the series of problems that has rocked the giant insurer since its last shareholders meeting, Mr. Liddy said, "AIG strayed from what it does best: the business of insurance."

Discussing the company's plans to sell assets to repay government loans, Mr. Liddy noted the faltering economy has made it more difficult to get fair value for properties, and he added returns for assets should improve when the economy improves.

He also cited as a significant step forward the company's plans to transfer its two major foreign insurance companies, ALICO and AIA, into special purpose vehicles.

Stock in these units, according to the March filing, will be exchanged for a special reduction in AIG's debt by the Federal Reserve Bank of New York.

Mr. Liddy mentioned the transfer of AIU Holdings, AIG's global property and casualty insurance franchise, into a special purpose vehicle with a possible stock offering as another step forward.

Some shareholders remained on edge and asked Mr. Liddy for answers on issues ranging from whether he believes AIG's stock will recover to PricewaterhouseCooper's effectiveness in performing reviews.

Mr. Liddy defended PwC's job as auditor and declined to speculate on when AIG's stock may recover. He said he is a "bad stock picker," and said the company's stock could recover, but other stocks may recover faster.

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