Benmosche Gets $7 Million Salary to Take On AIG Turnaround Task

From Bloomberg News — August 18, 2009


Jeanne Branthover, Managing Director of Boyden’s New York office, gives her opinion on the hefty compensation American International Group Inc. Chief Executive Officer Robert Benmosche will receive to take on AIG’s turnaround task.

American International Group Inc. Chief Executive Officer Robert Benmosche will get a $7 million annual salary to take on a job that has stymied three of his predecessors. 

Benmosche, who started this month as CEO and president of AIG, once the world’s largest insurer, will get $3 million in cash and $4 million in common stock, the firm said yesterday in a regulatory filing. Benmosche, 65, also is eligible for as much as $3.5 million a year in long-term incentive awards. 

“This is a lot of money, but this kind of pay is not extraordinary for a CEO of a major financial services firm,” said Jeanne Branthover, a managing director at Boyden Global Executive Search Ltd. in New York. “The cash component had to be enough to attract a very strong candidate and give that person enough incentive to make a change.” 

The former MetLife Inc. CEO has to retain customers and employees to preserve the value of AIG units that will be sold to repay loans included in the company’s $182.5 billion U.S. rescue. He replaced Edward Liddy, the ex-Allstate Corp. chief who collected a $1 salary and was appointed in September after the New York-based insurer agreed to turn over a majority stake to the U.S. to avoid collapse.

Benmosche’s agreement was approved “in principle” by Kenneth Feinberg, the Obama administration’s so-called special master for pay at firms that took the most bailout funds, AIG said. Benmosche isn’t eligible for severance if he’s terminated. 

Shares granted to Benmosche won’t be transferable for five years and any bonuses are subject to recovery by AIG if the awards are based on “materially inaccurate” financial statements, the company said. 

‘Guarantees His Pay’ 

“The design of a CEO’s pay structure is far more important than the amount,” said Frank Glassner, chief executive officer of pay consulting firm Veritas LLC. He said Benmosche’s package “guarantees his pay, he gets the $7 million whether he performs or not.” 

Christina Pretto, an AIG spokeswoman, declined to comment and Feinberg didn’t return a call.

AIG said the salary and stock are “strong incentives” for Benmosche to perform in the best interests of the company. He ran MetLife, the largest U.S. insurer, for eight years through 2006 and, according to yesterday’s filing, has about 500,000 shares of the company’s stock and 2.1 million options. MetLife shares were valued at $34.40 in New York Stock Exchange composite trading at yesterday’s close. 

“If Mr. Benmosche were to act in a manner other than in AIG’s best interests, his financial interests would suffer, he could be fired and he might not receive any of that discretionary payment,” AIG said in the filing. 

MetLife Talks 

MetLife is in talks with AIG to buy American Life Insurance Co., one of its biggest non-U.S. life insurance units, people familiar with the matter said last month. 

Benmosche won’t participate in any negotiations with MetLife, AIG said in guidelines designed to prevent potential conflicts of interest. A committee of AIG’s board will name an executive officer or senior manager as the chief transaction officer to handle such talks, the company said. 

Benmosche oversaw MetLife’s transition to a publicly traded business from a policyholder-owned firm. He got $1.1 million in salary, $6.25 million in bonus and about $8.8 million in long- term incentive pay in 2005, his last full year as CEO, according to a regulatory filing. 

Benmosche was on the board of Credit Suisse AG for seven years and decided to step down, the Zurich-based bank said Aug. 10. AIG agreed to sell mortgage-backed certificates to Credit Suisse for as much as $975 million, the insurer’s American General Finance unit said in a July regulatory filing. 

Liddy’s Compensation 

Liddy, who returned AIG to profitability in the second quarter after more than $100 billion in net losses in the six prior periods, got total compensation valued at about $460,000 in 2008 to cover housing, travel, taxes and legal fees, according to a company filing. He came out of retirement to take the job for a $1 salary. 

He oversaw the beginning of efforts to repay the government by selling assets. When Liddy failed to find buyers as quickly as expected, he persuaded the U.S. to expand the bailout three times. The package includes a $60 billion credit line, an investment of as much as $70 billion, and $52.5 billion to buy mortgage-linked assets owned or backed by AIG. 

Martin Sullivan, the last AIG CEO to work a full year, received compensation valued at $14.3 million for 2007, the insurer said in 2008. He was replaced by Robert Willumstad, who was forced out in September 2008 after about three months. 

Travelers CEO 

Jay Fishman, CEO of Travelers Cos., the insurer that replaced AIG in the 30-company Dow Jones Industrial Average, got a package valued at $14.7 million for 2008, the company said in a filing. That included salary of $1 million, stock awards worth $4.19 million and option awards valued at $3.46 million. He also got $5 million from an incentive plan.  Representative Elijah Cummings, a Maryland Democrat who called for Liddy’s resignation in 2008, had said AIG

should use President Barack Obama’s $400,000 salary as a model in setting compensation for the insurer’s top post. Such a salary may limit the pool of qualified candidates, said pay consultants including Alan Johnson, managing director of Johnson Associates Inc. 

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