AIG To Pay Benmosche Much More Than Liddy's $1

NU Online News Service, Aug. 18, 3:25 p.m. EDT

American International Group will pay its new chief executive more than the $1 its embattled former CEO agreed on when he took the job at the behest of the U.S. government last year.

In a filing with the Securities and Exchange Commission on Sunday, New York-based insurer AIG said it reached an agreement with its new President and Chief Executive Officer Robert H. Benmosche to pay him an annual salary of $7 million.

The former MetLife chief executive will receive $3 million in cash and $4 million in fully vested AIG stock.

Mr. Benmosche will not be able to transfer the shares for five years except as AIG's Compensation and Management Resources Committee may approve in the case of death or disability, the filing said.

He also will be eligible to receive a performance-based, long-term incentive award of up to $3.5 million a year (to be prorated for 2009) "in the form of stock or phantom stock units" in the company.

The amount and form of payment will be at the discretion of the compensation committee based on his performance. The incentive bonus will be "subject to vesting, transfer and payout restrictions" established under the Troubled Asset Relief Program (TARP).

AIG said Mr. Benmosche will not be entitled to any severance "on termination of his employment for any reason."

Edward Liddy, who recently stepped down as the chief executive of AIG, took the position for a token amount of $1 a year after Treasury officials asked him to take the job. The government owns a major amount of AIG stock through loans from the Federal Reserve Bank of New York and funds made available under TARP.

The funding was needed after AIG ran into financial trouble covering its credit default swap obligations that almost bankrupted the company.

The compensation arrangement has been presented to the TARP Special Master, Kenneth Feinberg, who is charged with approving executive compensation arrangements for companies receiving TARP funding. AIG said Mr. Feinberg "has expressed approval in principal" but has not formally approved the plan.

Addressing concerns about conflicts of interest between AIG and MetLife, noting that Mr. Benmosche owns more than 2.5 million in MetLife shares, AIG said a review by the company's law firm determined that the new chief executive could act in the best interests of AIG. It also detailed a list of transaction guidelines to ensure Mr. Benmosche avoids any conflict of interest.

Among the 11 guidelines, he will not engage in any negotiations between the two companies, a board of three independent directors will review any such transactions, and a chief transaction officer will be appointed to engage in any such negotiations, reporting to the committee and not Mr. Benmosche.