Five top AIG execs are threatening to resign if their pay is slashed significantly by Obama's pay czar, the Wall Street Journal reports today.
The executives reportedly sent written warnings to AIG's chief counsel over the weekend; two of the senior staff members have since retracted their threats.
Many AIG employees have fought back against the limits proposed by Kenneth Feinberg, the Obama administration's so-called 'pay czar.' In a recent cover story, New York Magazine's Gabriel Sherman pointed to a growing sense among many AIG employees that they're being scapegoated for the behavior of just a few traders in the insurer's financial products unit.
NYmag spoke to a few AIG executives and traders who accuse Feinberg of painting with too broad of a brush:
"If people are angry about the arsonists, it's not a good idea to go out and shoot the firemen," one FP executive says. "There were over 40,000 positions on our books, and less than 125 of them blew up the company," adds an FP executive, who, like many people interviewed for this article, spoke on the condition of anonymity, citing threats against AIG employees. "It's absurd in the extreme," says another. "Should we punish everyone at FP? Everyone at AIG, everyone in New York? Everyone on Wall Street? Where does it end?"
The Wall Street Journal reported that the executives fear further constraints on their pay in 2010, as well as a potential ban on the lucrative severance packages still offered to executives at the company. The Journal suggested that executives, who can be entitled to severance pay if they resign, might leave AIG in order to cash in on their severance payout:
"According to terms of the severance plan, which was put in place before the government bailed out AIG, certain executives are entitled to severance benefits if they resign for "good reason," which includes significant cuts in their annual base salary or target bonus.
The executives' indignation over potential pay restrictions comes less than a month after AIG's new CEO, Robert Benmosche, made a similar threat to resign in protest over government oversight of the company. Checks on compensation, he told AIG's board, limited the company's ability to attract and retain talent. Benmosche ultimately opted to stay at AIG, and last month his $7 million pay package was approved by the company's board.
The federal government, which has committed over $180 billion in support of the insurance company, moved to limit compensation for AIG's top 25 executives last October. Under the provisions, pay was reduced by 57% and base salaries generally limited to $500,000.
Another 75 senior executives at AIG could reportedly be added to the list of employees covered by the pay limits.
Read the WSJ's full story here.