AIG To Restrict Executive Pay, Cut Bonus

November 25, 2008 4:41 p.m. EST

New York, NY (AHN) - American International Group announced Tuesday it will limit executive compensation beginning with CEO Edward Lilly, who will receive a $1 salary and receive no bonus for 2008 and 2009.

The move comes as the insurance company tries to show Congress it is now being wasteful with government bailout funds.

The new compensation plan affects the top seven AIG executives. None of the executives will receive a bonus in 2008 or 2009 or be eligible for a salary increase. The next 50 highest AIG executives will also see a salary freeze through 2009.

Lilly offered to take a $1 salary in order to kickoff the stricter compensation plan. However, he will be eligible for stock-based compensation in 2010. With Lilly's compensation tied to stock it gives a better perception he has a vested interest in the performance of AIG.

The change in compensation comes just weeks after New York Attorney General Andrew Cuomo sent a letter to AIG stating the insurer's compensation plans should be completely transparent.

Financial institutions that receive government aid are required to put specific limits on executive compensation and bonuses. AIG said its new plan exceeds the required restrictions.

AIG has received $152 billion in aid from the government, more than any other institution during the current financial crisis.