AIG CEO – 40% Pay Raise for 2014

Posted by Jack

INVESTOR ALERT –

AIG-American International Group Inc. Chief Executive Robert Benmosche received total compensation of $14.8 million in 2013, a 40% increase over the prior year’s $10.6 million total.

The pay package for Mr. Benmosche, 69 years old, has stock awards were valued at $6.5 million, and he also received a short-term cash incentive award of $6 million, representing 150% of his bonus opportunity. Of the $6 million, half is deferred until March 2015 presumably to avoid taxes.

AIG received one of the government biggest bailouts during the financial crisis, which was fully repaid by the end of 2012. The bailout was repaid.

AIG stock is trading at about the same value it had in 2009, adjusted inflation and splits. It is woefully short of it’s highs prior to the recession. AIG was considered by the government too big to fail.

This entry was posted in Uncategorized. Bookmark the permalink.

3 Responses to AIG CEO – 40% Pay Raise for 2014

  1. Tina says:

    Interesting. Under the new Dodd Frank rules regarding “too big to fail” banks are now required to hold big cash reserves so that the government, ostensibly, will never have to bail them out again. Insurance Journal reported in July last year that AIG closed down its banking unit because of Dodd Frank:

    American International Group Inc. will return funds to customers of its banking unit and shut their accounts as the Dodd-Frank Act places limits on insurers with deposit-taking units.

    AIG Federal Savings Bank “will no longer be servicing retail deposit accounts as of Sept. 30,” according to a letter to customers. “All accounts will be automatically closed as of that date and any funds, including all interest due on your accounts, will be returned.”

    AIG is joining Principal Financial Group Inc. in narrowing its focus ahead of rules that limit proprietary trading and investments in private-equity or hedge funds by insurers with bank units. MetLife Inc., Hartford Financial Services Group Inc. and Allstate Corp. have sold deposits or retreated from banking as regulators increase oversight.

    “AIG Federal Savings Bank is currently undergoing an orderly transition from a traditional savings bank to a trust only thrift,” Jon Diat, a spokesman for the New York-based insurer, said in an e-mail yesterday.

    Robert Benmosche, the chief executive officer of New York- based AIG, said last year that the insurer was weighing whether to shutter its bank to limit the effects of the Volcker rule. AIG is a savings and loan holding company, and some of the restrictions may apply to the company even if it ends its bank status, according to the insurer’s annual report.

    It may be that the large bonus was in appreciation for overseeing the transition and deciphering the nightmare of Dodd Frank which creates a mountain of paperwork and redtape. This site indicates at least one of the headaches:

    American International Group (AIG), GE Capital and Prudential have been designated SIFIs. Prudential has asked for a hearing to appeal the designation.

    “Under Dodd-Frank, firms designated as non-bank SIFIs will be subject to so-called ‘enhanced prudential standards.’” explained Steven Kandarian, MetLife’s president and CEO, during a recent speech in Washington, “As drafted by the Federal Reserve, these standards are based on the regulatory capital model for banks, where high leverage, liquid assets and short-term liabilities require large capital cushions to absorb losses.”

    Kandarian said that bank capital framework is familiar to the Fed, but the state-based insurance capital framework is not.

    “No amount of ‘tailoring’ will ever make bank capital standards fit a life insurer’s balance sheet,” Kandarian said. “Bank capital rules were established to protect depositors. They were not designated to ensure that a life insurance company can meet its long-term policyholder obligations.”

    Kandarian also believes that more restrictive capital rules could lead to higher prices for consumers and put the company at a disadvantage against smaller competitors.

    Meanwhile AIG, as well as others, are still being designated “too big to fail”.

    This government is out of control. Their manipulating busy work makes a mess, creates nonproductive work and headaches for those attempting to comply, and hasn’t helped the general public in any way…the economy meanwhile remains stagnant.

    AIG is a $459 billion company. The work may have been worth that kind of compensation to them.

    • Post Scripts says:

      Tina, I’m pretty sure the CEO at AIG merely deligates and doesn’t get his hands dirty with interpretating statutes. His department heads and their expert assistants are the ones more likely to be tasked with sorting out the nuances of Dodd Frank and other federal regulation. They also make the proposals for strategy, the CEO and the BoD just give up a thumbs up or thumbs down.

      This CEO was more likely benefiting from a handpicked BoD that will themselves be rewarded later when it’s their turn. The CEO here was lucky to be in the right place at the right time as businesses across the board began to mend after the thrashing they took in the recession. So, I honestly don’t see his worth, he had no remarkable investment strategies and their was no spectacular guidance coming from him personally. He’s just another example of those terribly over compensated CEO’s that loot the corp coffers and it’s why I sold my shares of AIG, that and because my shares didn’t go up 40%, if they had I would have applauded his raise.

      I wish more stockholders would be as demanding and then divest in protest when CEO’s get greedy and take too much of their money.

  2. Tina says:

    Jack you did the only thing a (minor?) stockholder can do when he’s unhappy with the board’s decision…good for you. There are plenty of great stocks.

    Although I understand the sense of outrage people have about the high compensation of CEO’s I’m not sure we always understand the reasons…other than the competitive aspect…behind boards’ decisions.

    I don’t entirely agree with your assessment of the duties and responsibilities of a CEO. The CEO sets the tone for the company and is responsible for it’s working and winning…also not. Yes, he overseas the work that underlings do. But what does that mean? It means that in order to be adequate you have to be thoroughly aware of their work and have enough competence yourself to know whether they are doing what needs to be done. Why?

    Because it is the CEO who will be called upon to answer questions from the board and, more importantly, from authorities if things are not done properly. It is the CEO that will land in jail if any monkey business goes on. It would be stupid to just lay back and collect money. But even if he does everything he can to oversea his employees there are no guarantees that those under him will not do something criminal, making the job of CEO carry certain risk as well. The CEO’s performance and leadership will affect everyone associated with the company, shareholders, employees, customers, and vendors.

    It would be interesting to know how the board, or the committee they formed to make the decision, measured this man’s performance to determine compensation. If it was done by an appointed committee, SEC regulations require the report be made available to the shareholders.

    This is one of the many reasons so many people work for themselves…or prefer to work for smaller businesses. These guys play in a world most will never play in and can’t even fully imagine. Rewards are big but so can the responsibilities and risks be.

    Hope you found a more satisfying place to put your money, Jack, it isn’t easy right now.

Comments are closed.