In a memo to the company's employees, AIG CEO Robert Benmosche said Wednesday that he and the board remain "totally committed" to leading AIG.
"We are all working aggressively to overcome this compensation barrier that stands in the way of restoring AIG's value and allowing us to live up to our obligations to all stakeholders," he wrote in the note.
People started speculating as to whether Benmosche would remain with the firm after a threat he made at a board meeting last week, when he said he was "done" with the job.
Benmosche's warning followed a three-hour meeting he and the firm's other directors held with U.S. pay czar Ken Feinberg and Herb Allison, the recently confirmed Treasury assistant secretary for financial stability, who oversees TARP.
During the meeting at AIG's headquarters in New York, Benmosche and the directors tried to make the case to Feinberg and Allison that the recently approved pay plan for AIG executives would hinder the insurance giant's ability to retain talent, the source said. A specific sticking point was the cash portion of the pay-czar approved plan.
While total compensation for the 13 executives range from $125,000 to $7,600,0000 — excluding the $10,500,000 being paid to Mr. Benmosche — the cash portion of these packages range from $125,000 to $425,000, a level the firm says is not acceptable to people in these positions. Benmosche's cash portion is $3,000,000.
Benmosche and the board said this pay is not enough to prevent people from leaving the firm, given that many have seen much of their net worth evaporate because of the plunge in AIG's stock. AIG has yet to appeal the pay czar's decision. The source said the board was that told if it did appeal, that action would affect the pay czar's decision on pay for 2010.
The source said Feinberg was not receptive to the board's pleas. This prompted Benmosche to tell the board he could not do the job he was hired to do, and said he wanted to quit.
AIG is one of seven firms under the supervision of the pay czar because it is heavily indebted to the government. The U.S. owns 80 percent of the firm following a $180 billiion bailout last year that included loans and backstops to the insurance giant.