WASHINGTON–Federal Reserve Board Chairman Ben Bernanke has sent out a letter assuring Sen. John Kerry, D-Mass that his agency has pressed American International Group to ensure that "robust" corporate governance surrounds any decisions about employee compensation.
Chairman Bernanke said in his Tuesday letter that the systems established by AIG to comply with the Fed requests includes review of all employee compensation decisions by its human resources division, the compensation panel of AIG's board, and consultation with outside experts.
He wrote the senator that the Fed also supported the establishment of a special governance committee within AIG, the issuance of a new expense policy guidebook for all employees "and the cancellation of all meetings, conferences and other events that are not strictly justified by clear business needs."
In December, Mr. Bernanke said, AIG created a "strengthened internal reporting and oversight process" for expenses under the direction of a senior vice president.
In addition to monitoring and reporting compliance with the recent expense guidebook, the objective of the new process "is to establish targets for expense reductions consistent with the company's divestiture program and a reporting framework for the government and other constituencies," Chairman Bernanke said.
The letter advised that, "We believe it is in the taxpayer's interest for AIG to provide reasonable, market-based compensation with a view toward attracting and retaining qualified staff in order to maintain the value of the businesses that AIG is seeking to sell in order to repay the federal financial assistance it has received."
At the same time, Mr. Bernanke added that, "we are mindful that the company must avoid excessive compensation and other unnecessary expenditures that do not further this objective."
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