AIG Said to Query Bonus Holdouts on Pay in Push for Concessions

March 12 (Bloomberg) -- American International Group Inc.’s effort to reach its commitment of $45 million in bonus concessions are focusing on former employees who have refused to accept reduced payouts, said people with knowledge of the talks.

The insurer mailed questionnaires this month to ex-workers at the Financial Products unit asking whether they’d earned income after leaving AIG, said the people, who declined to be identified because the negotiations are private. Under the program, compensation earned by former AIG staff in 2009 from another employer would lower payouts to be delivered next week from the New York-based company, the people said.

AIG is seeking to satisfy U.S. paymaster Kenneth Feinberg’s demands that derivatives staff return the full amount they pledged to give back after a March 2009 backlash against the awards. The employees, who worked in the unit blamed for losses that pushed AIG to the brink of collapse in September 2008, agreed to about $39 million in cuts as of Jan. 29. The bailed- out insurer said the awards were necessary to retain staff critical to unwinding trades.

“AIG owes the taxpayer a huge amount of money and we want to make sure that my compensation practices take into account the need for AIG to thrive,” Feinberg, the Obama administration special master on executive pay, said in a Dec. 11 interview with Bloomberg Television.

More than 95 percent of about 200 current Financial Products workers agreed to bonus cuts of 10 percent, one of the people said. Most of about 60 former workers refused to make concessions and responded that they didn’t earn income after leaving AIG, the person said.

‘Remains Committed’

The former employees, who were asked to take a 20 percent reduction, are due to receive bonuses by March 15 under the retention agreement, the person said. If AIG doesn’t reach its goal, it may be prohibited from raising salaries of top-earning employees under Feinberg’s jurisdiction, Treasury has indicated to the insurer.

AIG “remains committed to reaching the target and we’re confident we will,” said Mark Herr, a spokesman for the insurer, in a statement.

The firm said last month that it was overhauling its incentive system to reward employees for performance. The backlash against AIG compensation peaked a year ago with President Barack Obama criticizing the awards.

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net;