AIG ‘Retention Pay’ Rises to $619 Million « The Washington Independent
You’d think that a corporation that’s got a $150 billion taxpayer-funded lifeline keeping it afloat would take steps to rein in extra pay to executives. But in the case of American International Group, you’d be wrong.
AIG is slated to dole out $619 million in “retention pay” to keep executives and other employees from fleeing the troubled insurance giant, Bloomberg reported yesterday. The figure is $150 million more than the company said it would distribute for retention pay in a November filing.
The additional payouts have captured the attention of Democratic Rep. Elijah Cummings (Md.), who met with AIG CEO Edward Liddy Thursday, Bloomberg wrote:
Cummings … has said AIG downplayed the extent of the pay and that it’s unnecessary to give so much cash when job markets are weak.
“My constituents who are losing jobs and homes don’t understand why life should continue for these AIG executives as it did before the bailout,” Cummings said in an interview.
The episode also brings to light the creative wordplay used by Wall Street to avoid certain restrictions. In November, AIG said it would forgo “bonuses,” yet the company simply filled the void with “retention pay.”
Rep. Brad Sherman (D-Calif.) brought a similar issue to light this week during debate over a House bill to restrict spending under the Wall Street bailout. That proposal would have prohibited executive bonuses and incentive-based pay, but not salaries — a glaring loophole that might allow companies to shift compensation from one column to the next to avoid the prohibition. “The creativity of the corporate world is enormous,” Sherman had warned last week.
This does nothing to answer the obvious question: Why would anyone want to retain the same folks that just ran the company into the ground?