AIG agrees to restructure some bonuses

March 15, 2009 at 12:00a.m.

WASHINGTON (AP) — Insurance giant American International Group has agreed to Obama administration demands to restructure some of its corporate bonuses.

However, the troubled company will still pay out millions of dollars in bonuses after the Treasury Department determined that the government did not have the legal authority to block those payments.

Treasury Secretary Timothy Geithner has demanded that the company scale back future bonus payments where legally possible, an administration official said Saturday.

This official, who spoke on condition of anonymity because of the sensitivity of the issue, said that Geithner had called AIG Chairman Edward Liddy on Wednesday to demand that Liddy renegotiate AIG’s current bonus structure.

Geithner termed the current bonus structure unacceptable in view of the billions of dollars of taxpayer support the company is receiving, this official said.

In a letter to Geithner dated Saturday, Liddy informed Treasury that it would restructure $9.6 million in bonuses scheduled to go a group that covers the top 50 executives. Liddy and six other executives have agreed to forgo bonuses.

The group of top executives getting bonuses will receive a total of $9.6 million now, with the average payment around $112,000.

This group will get another 25 percent on July 14 and the final 25 percent on September 15. But these payments will be contingent on the AIG board’s determining that the company is meeting the goals the government has set for dealing with the company’s financial troubles.