AIG Seeks Fed Approval On Executive Bonuses
ROBERT SIEGEL, host:
The insurance giant AIG is back in the spotlight today. This is the company that got a $180 billion of government bailout funds because of a fear that it was too big to fail. Now, some AIG managers are scheduled to be paid bonuses for work that they did last year. An initial round of bonuses in March brought huge protest.
And as NPR's Tom Gjelten reports, the company is unsure of how to proceed with the latest bonuses.
TOM GJELTEN: Anyone who has followed AIG recently knows these bonus payments were coming due. The Obama administration concluded in March, it couldn't stop the company from going ahead with the bonuses because they'd been contractually promised. Since then, the administration has a new compensation czar, Kenneth Feinberg, with the authority to veto or approve some executive pay arrangements for companies receiving government funds. Because these bonuses were for work done last year, they are technically outside Feinberg's control.
But having been chastened by the anger they endured in March, AIG executives would like the administration to bless these payments beforehand. Some of these bonuses would go to managers of the financial products unit at AIG, that's the division that created the risky securities that led to the company's downfall. But the company says, the managers set to be rewarded are not the ones responsible for the problems. This leaves the company in a bind. If it pays these bonuses, the company will arouse more anger, but if it does not, it may see an exodus of the very people needed to repair the damage done by their predecessors.
The administration is not yet saying what counsel it will give. In a general statement, the Treasury Department said only that companies need to strike a balance discouraging executives from excessive risk-taking while still rewarding performance. The company's problems have dragged its stock price down. A Citigroup analyst yesterday said it could soon be worthless. Oddly though, AIG stocks rose today recovering nearly all the value it lost yesterday.
Tom Gjelten, NPR News, Washington.
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