AIG staff agree to bonus cuts

AIG staff agree to bonus cuts
By Francesco Guerrera in New York
Copyright The Financial Times Limited 2010
Published: February 3 2010 00:24 | Last updated: February 3 2010 00:24
http://www.ft.com/cms/s/0/cc0743d2-1057-11df-a8e8-00144feab49a.html


AIG, the US government-controlled insurer, will pay around $100m in bonuses to some 200 employees of its troubled financial products unit this week after they agreed to cuts of at least 10 per cent in their pay-outs in an effort to defuse the political furore over the issue.

The move will enable AIG to return millions of dollars in unpaid bonuses to the US authorities and almost fulfill a pledge made by Ed Liddy, its former chief executive, to repay $45m, due to employees of the financial products division, to taxpayers.

People close to the situation said that after negotiations with staff of AIG Financial Products, the unit that was responsible for most of the losses that pushed the insurer to the brink of collapse in 2008, nearly all of its employees had agreed to cuts in their 2010 bonuses.

AIG insiders said employees had agreed to reductions ranging from 10 per cent to more than 20 per cent. In return, their bonuses would be paid a month earlier – this week rather than in mid-March.

The reductions will save AIG – and the government, which owns 80 per cent of the insurer – around $20m. Coupled with a further $19m in bonus cuts AIG had already agreed with the employees, the sum will take the insurer closer to its repayment target.

AIG on Tuesday said it had won a further $4.5m in bonus cuts for people who no longer work for the company but that it was unclear whether those funds could be repaid.

Despite strong political opposition, AIG has maintained that it was contractually obliged to pay the bonuses, arguing that it was vital to keep employees to wind down the complex trades placed by the financial products group.

In a statement on Tuesday AIG said: “We are greatly appreciative that virtually all – some 97 per cent – of active financial product employees have volunteered to reduce their upcoming 2010 payment to help achieve our giveback target. We have decided to begin these reduced payments to these active employees as well as those non-active employees who agreed to reductions. The reductions from these two groups stand at about $20m, and we believe this allows us to largely put this matter behind us.”