Gediminas Jasionis

American International Group, Inc. (NYSE: AIG) implementing retention plan

by Gediminas Jasionis January 28, 2009
4aig_logo.jpgAmerican International Group, Inc. (NYSE:AIG) will be paying out around $450 million as retention payments to some employees. The payments will be made to approximately 400 employees who are in the financial products unit of the company. The money will be paid out in two payoffs.

Further, the company plans to distribute around $619 million as retention payments to executive officers. In addition to other payment this sums up to over $1 billion in total.

"I was extremely disappointed - but not surprised - to learn that AIG will be awarding bonuses to the very division that drove the company into the ground," said Rep. Elijah Cummings, D-Md., a member of the House Committee on Oversight and Government Reform. The financial unit was mostly responsible for the downfall of AIG when the mortgage crisis began. It was the one to hold damaging assets that drove the company down at the time.

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The plan surely looks not in place when considering the company's current financial situation. However, such plan was adopted nearly a year ago, when the company was still doing considerably well. Having that in mind is was probably no way to cancel out this plan, even if payments will be made using the money US government inflated into AIG.

Although criticized, the plan is actually helping to keep the employees at the company. This also prevents AIG's assets from losing value, so in general the plan has rather upsides as well.

References:

American International Group (AIG) message board on HotStocked

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