Copyright 2010 MarketWatch.com Inc.All Rights Reserved
June 24, 2010 Thursday 9:00 AM EST
SECTION: NEWS & COMMENTARY
LENGTH: 287 words
HEADLINE: AIG’s top employees said to get more stable pay
BYLINE: April H. Lee, MarketWatch mailto:firstname.lastname@example.org.
April Lee is a MarketWatch Reporter based in New York.
NEW YORK (MarketWatch) — Beleaguered insurer American International Group Inc. has changed its pay package for top-paid staff, switching to an unusual arrangement based on its debt, according to a published report.
The Wall Street Journal on Thursday said that AIG’s (AIG) new pay plan will base its employees’ non-cash pay on the value of the company’s debt rather than its volatile stock price.
In instead of receiving AIG stock, the top performers received so-called long-term performance units, which derive 80% of their value of AIG’s junior debt and 20% of their value from AIG’s common stock.
AIG started using long-term performance units, a policy which was approved by Treasury pay czar Kenneth Feinberg, in May, according to the Journal.
Because it falls under government control, AIG’s 100 highest paid employees must receive much of their compensation in company securities and their annual cash salary can’t exceed $500,000.
For months, the government-controlled firm has struggled to keep employee pay competitive while complying with federal pay limits. The U.S. government owns almost 80% of the company and is owed $102 billion by AIG and its units.
The performance units should be more reflective of AIG’s long-term value, said the Journal. The junior debt, to be repaid before the Treasury’s $49 billion in preferred shares, is seen by many analysts as having significant value, it added.
AIG shares, whose value depends largely on whether AIG repays the government, have swung between a low of $8.22 and a high of $55.90 the past year, closing at $37.81 Wednesday, up 26% this year.
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