American International Group Inc. (NYSE:AIG) has promised investors, government officials and others that it will keep company executives from using corporate aircraft for personal travel.
AIG, New York, has posted an updated luxury expenditure policy, which includes the rules on use of corporate aircraft, in a report filed with the U.S. Securities and Exchange Commission.
AIG has come under attacks on its executive compensation policies since late 2008, when AIG needed government help to cope with the effects of derivatives deals that went bad.
The updated AIG luxury expenditure policy "prohibits personal use of corporate aircraft, other than personal use by the chief executive officer if the personal use is incidental to a business trip, and requires that any incremental cost incurred by AIG as a result of any such use must be reimbursed," the company says in the SEC filing.
"AIG prohibits excessive and luxury expenditures on: (i) entertainment or events; (ii) office and facility renovations; (iii) aviation or other transportation services; and (iv) other activities that are not reasonable expenditures, including any such expenditures for staff development or other similar measures," the company says in the updated policy.
But "the reasonableness of expenses may vary by region or industry depending on the customs, practices, and legal restrictions in that region or industry," the company says. "Expenditures that are considered reasonable or customary within a particular industry and are consistent with law are not prohibited by this policy."
AIG prohibits most company-sponsored celebratory events, but AIG units still can hold events that acknowledge "key AIG career milestones," the company says.
"Holiday parties must be approved by senior management and should, where practicable, be held in AIG facilities," the company says.
In the section on aviation services, the company states that the AIG chief administrative officer must approve each use of corporate aircraft in advance. The CAO can approve use of corporate aircraft over commercial air transportation when using corporate aircraft is warranted by a sound business justification, "such as material time savings, convenience or flexibility or substantial safety and security advantages."
Relatives and guests of the AIG chief executive officer and other AIG executives can travel on AIG aircraft "if a documented business reason exists for the family member of guests to travel with the xecutive," the company says.
But the chairman of the AIG board or the chairman of the AIG corporate governance committee must sign off before any relatives or guests of the AIG CEO can fly on corporate aircraft, and elected officials and candidates for public office must keep off AIG aircraft.
"Personal use of the corporate aircraft by the AIG CEO is permitted if the personal use is incidental to a business trip and the incremental cost is paid by the AIG CEO," the company says. "All other personal use of the corporate aircraft is strictly prohibited."
AIG has included a copy of the time sharing agreement that AIG and the company's current CEO, Robert Benmosche, are using to split expenses related to AIG's 5 corporate aircraft. The exhibit gives the U.S. registration numbers and manufacturers' serial numbers for the aircraft.
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