NU Online News Service, Feb.11, 12:28 p.m. EST
American International Group, which has been under fire for its bonus distributions, said it has instituted a performance management system for employees' compensation.
The "forced ranking system" would put employees in four different tiers according to their performance.
Those in the highest, number one tier, would receive the most in bonus money. About 20 percent are expected to fall into band two for performing above expectations and 50 percent in band three, at expectations with an underperforming 20 percent receiving less pay.
The system was emplaced recently by AIG Chief Executive Officer Robert H. Benmosche.
A statement from the company said the initiative "aims to bring greater alignment between an individual's performance and compensation. Aligning pay and performance is the hallmark of many world-class organizations and is critical to our future success."
It added that, "The first step toward building a high-performance management culture is implementing relative performance ratings that will compare an individual's performance to that of others in his or her peer group. These ratings will help ensure that our people are accountable, recognized and rewarded for their achievements. By motivating and driving our talent, it will also help us remain competitive and ensure a strong, growing enterprise."
AIG has been under criticism for its compensation practices since last March when bonuses went to members of the financial products unit, which brought the conglomerate to the brink of bankruptcy requiring billions in federal bailout money.
This month the company paid out $100 million in bonuses after winning employee consent to a $20 million cutback in those payments.
Management has defended the bonuses for the financial products unit as legally required by contract and needed to keep competent people on the job to wind down the financial products operations.
That defense has not stopped withering criticism from Congress. Sen. Charles Grassley, R-Iowa, has argued that some bonus payments may be unwarranted because the bonuses were authorized after the government took a 79.9 percent interest in the company and began providing funds to AIG in September 2008.
Salary czar Kenneth Feinberg has set limits on what companies like AIG that have been assisted with federal Troubled Asset Relief Program funds can provide in the way of top management bonuses.
Last month Anastasia Kelly, AIG vice chairman for legal, human resources, corporate affairs and corporate communications, resigned in the wake of a pay cut ordered by Mr. Feinberg.
The White House has said AIG is among companies accepting federal aid that it wants to hit with a tax as a way of recovering bonus monies.
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