Exec bonuses under TARP take fire

(AP Photo/Mark Lennihan) (AP Photo/Mark Lennihan)

American International Group president and CEO Robert Benmosche earned $10.5 million in total compensation in 2012, $3 million of it in cash, according to a report by the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).

The report said that Peter C. Hancock, the CEO of Chartis, earned $8 million in 2012, and that the Treasury Department, which had veto power over AIG salaries, approved a $1 million salary hike for Hancock.

The report said that Jay Wintrob, head of SunAmerican Financial Group, had $7 million of total compensation in 2012. It said Wintrob was paid $495,000 in cash salary, $5,315,000 in stock salary and $1.190 million in long-term restricted stock.

The report, however, indicated that most of the salaries of AIG top executives in 2012 were in stock, with $7.5 million of Benmosche’s compensation provided in stock. Hancock, according to the report, was paid $1.8 million in cash, $5.2 million in stock and $1 million in long-term restricted stock.

The data was contained in a SIGTARP report that sharply criticized the Treasury Department for “failing to rein excessive pay” for top executives of companies that received government bailouts through the Troubled Asset Relief Program.

The report noted, however, that AIG had exited the TARP program as of last year, and that responsibility for keeping track of its executive pay policies had shifted to the Federal Reserve Board.

“SIGTARP found that once again, in 2012, Treasury failed to rein in excessive pay,” the report said.

Christy Romero, special inspector general for TARP, said in the report that, “We expect Treasury to look out for taxpayers who funded the bailout of these companies by holding the line on excessive pay.”

Romero added, “Treasury cannot look out for taxpayers’ interests if it continues to rely to a great extent on the pay proposed by companies that have historically pushed back on pay limits.”

It added that, in 2012, OSM approved pay packages of $3 million or more for 54 percent of the 69 Top 25 employees at AIG, General Motors and Ally Financial Inc.

The report was especially critical of Patricia Geoghegan, Treasury’s acting special master for compensation. The report accuses her of sidestepping protocol that kept pay packages at the midpoint of comparable firms.

Geoghegan, however, defended herself in the strongest terms. For example, she said, AIG’s average total compensation for its top 25 employees was at the 48th percentile of similar positions at similar companies.

She also said that the report “mischaracterizes” the information her office, known as OSM, provided SIGTARP. For example, she said the report criticizes OSM for having “no criteria” for allowing pay packages without any long-term restricted stock, calling this “misleading.”

She also noted that AIG is the “most recent exceptional assistance recipient to repay its investments. Treasury sold its remaining stake in AIG by last November. “Not only did it exit TARP,” Geoghegan said, “but it also repaid the Federal Reserve Bank of New York,” noting that Treasury and the FedNY had made a $22 billion-profit on the deal.

In response to the report, Jim Ankner, an AIG spokesman, said that the company has “dramatically revamped its compensation practices to ensure that all employees are held directly accountable for clearly defined goals that reflect our commitment to properly balancing growth, profit, and risk.”

He said that when AIG was subject to TARP restrictions, AIG worked closely with the Special Master to make sure we paid our employees market-based compensation, including appropriate amounts of incentive pay, under a rigorous review process that will continue into the future.

“This principle to pay market-based rates for well-defined performance is shared across the entire company and is continually reviewed by our board,” Ankner said.

In addition, he said, “AIG remains highly focused to ensure we manage our risk profile in a strong and diligent manner and that the company’s goals are clearly aligned and balanced between profit, growth and risk.”

Ankner said that now, “AIG is evaluating certain pay structures to ensure the appropriate allocation of incentive compensation as a portion of total pay to employees that reflects our absolute commitment to pay for performance in a post-TARP environment."

Controls over compensation at troubled companies has been at place at Treasury since 2009, when disclosure that executives at the AIG Financial Products subsidiary were being paid $168 million in bonuses even though that division had played a prime role in forcing AIG to seek a government bailout.

AIG and Treasury officials defended the action at the time, noting that the payments were contractual.

At that time, a special outside overseer of executive pay for companies receiving TARP aid was created. It was headed by Kenneth Feinberg, a New York lawyer. Geoghegan has succeeded him.

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