NEW YORK — New York Attorney General Andrew Cuomo said American International Group's move Tuesday to restrict executive salaries and not give bonuses to its top executives in 2008 or raises in 2009 was a "positive step."
In a statement Tuesday, Cuomo said the gesture by the insurer was "appropriate," given AIG is receiving some $150 billion in aid from the federal government.
"Taxpayers have been slammed with a one-two punch seeing their investments dwindle while simultaneously having to fund the Wall Street bailout with billions of their tax dollars," Cuomo said. "It is only fair that top executives, who benefit the most when firms do well, should also bear the burden of the difficult economic consequences their firms now face."
On Tuesday, AIG said it would voluntarily eliminate 2008 bonuses for its top seven officers, there would be no salary hikes in 2009 for its 50 next-highest executives and that Chief Executive Edward M. Liddy would receive a $1 salary this year and next. Liddy won't be eligible for severance payments.
AIG also said it is developing a funding structure to ensure that no taxpayer dollars are used for annual bonus or future cash performance awards for the insurer's top 60 members of management.
"We believe these actions demonstrate that we are focused on overcoming our financial challenges so AIG can return value to taxpayers and shareholders," Liddy said in a statement.
Last week, Cuomo urged AIG to be "completely transparent" about its 2008 compensation plans.
Cuomo has been pressuring banks and other firms that have received government backing in the financial crisis to not give bonuses to their top executives.
Last month, Cuomo asked nine banks receiving federal funds as part of the government's financial rescue plan to provide his office with information about expected bonuses and compensation to be paid to their top executives.
The banks are: Bank of America Corp. (BAC), Bank of New York Mellon Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Merrill Lynch & Co., Morgan Stanley Inc., State Street Corp. and Wells Fargo & Co.
On a conference call with reporters Tuesday, Cuomo said Wells Fargo, Bank of America and Citigroup are among the firms he's waiting to hear from. He wouldn't comment on specific discussions, but said his office is having conversations with the three.
Cuomo said he hasn't yet reviewed Citi's proposed limits on executive compensation as part of a recent move by the federal government to shore up Citigroup.
Citi has said the agreement provides for an executive compensation plan, including bonuses, that rewards long-term performance and profitability, with appropriate limitations. The plan must be approved by the federal government.
On Tuesday, Cuomo encouraged other companies that have taken taxpayer dollars to not award bonuses to their top executives this year, as executives at Goldman Sachs, UBS AG, Barclays PLC, Deutsche Bank AG and AIG have done.
Cuomo said if a company intends to award multimillion dollar bonuses to its executives when that company is accepting government support, "I think you're adding insult to injury."
The attorney general noted it's "uncharted territory" for private-sector companies who've accepted public money and many companies are still trying to figure out their plans for 2008 bonuses and compensation going forward.
"The company now has a responsibility to the tax payer," Cuomo said. "It's a new day."
However, Cuomo said AIG executives should be rewarded if they turn around the company, repay the taxpayers and generate a profit.
"If you say we're using taxpayer dollars today for compensation bonuses for past performance, then we have a problem," he said.