{"id":40650,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/supplemental-determination-re-highly-compensated-employees-aig.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"supplemental-determination-re-highly-compensated-employees-aig","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/compensation\/supplemental-determination-re-highly-compensated-employees-aig.html","title":{"rendered":"Supplemental Determination re. Highly Compensated Employees – AIG"},"content":{"rendered":"\n\n\n
\n

DEPARTMENT OF THE TREASURY
\n<\/strong>WASHINGTON, D.C. 20220<\/p>\n<\/td>\n

\n

\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\n

August 3, 2010<\/p>\n<\/p>\n

Jeffrey J. Hurd, Esq.<\/p>\n

Senior Vice President :<\/p>\n

Human Resources and Communications<\/p>\n

American International Group, Inc.<\/p>\n

70 Pine Street<\/p>\n

New York, New York 10270<\/p>\n<\/p>\n

Re:<\/em><\/strong> Supplemental Determination
\nRegarding<\/em><\/strong><\/p>\n

2010 Compensation Payments and Structures for <\/em><\/strong><\/p>\n

Most Highly Compensated Employees<\/em><\/strong><\/p>\n<\/p>\n

Dear Mr. Hurd:<\/p>\n<\/p>\n

This letter addresses requests submitted by you on behalf of American
\nInternational Group, Inc. (“AIG”), for approval by the Special Master for TARP
\nExecutive Compensation (the “Special Master”) regarding (i) compensation
\npotentially payable to a “Top 25” executive, and (ii) compensation structures of
\nemployees in the “Covered Employees 26:100” group. This letter also provides a
\nclarification regarding compensation structures approved for the “Covered
\nEmployees 26:100” group.<\/p>\n<\/p>\n

Under the Department of the Treasury153s Interim Final Rule on TARP Standards
\nfor Compensation and Corporate Governance (the “Rule”), the Special Master must
\napprove the compensation structures and amounts payable to “Top 25” executives
\nof “exceptional assistance recipients” such as AIG. 31 C.F.R. \u00a7 30.16(a)(3)(i).
\nThe Special Master must also approve the compensation structures:but not
\nindividual amounts payable:to executive officers who are in an exceptional
\nassistance recipient153s “Covered Employees 26:100” group. Id. <\/em> \u00a7
\n30.16(a)(3)(ii).<\/p>\n<\/p>\n

1. Top 25 and Covered Employees 26:100 Omissions<\/u><\/p>\n<\/p>\n

Pursuant to the Rule, on March 23, 2010, the Special Master issued an initial
\ndetermination (the “Top 25 Determination”), which concluded that certain
\ncompensation structures and amounts payable to AIG153s Top 25 executives would not
\nresult in payments that are “inconsistent with the purposes of section 111 of
\nEESA or TARP, or [are] otherwise contrary to the public interest.” Id.
\n<\/em> \u00a7 30.16(b)(1) (the “Public Interest Standard”). On April 16, 2010, the
\nSpecial Master issued another initial determination (the “26:100
\nDetermination”), which concluded that certain compensation structures for AIG153s
\nCovered Employees 26:100 group are consistent with the Public Interest Standard.\n<\/p>\n<\/p>\n

\n

<\/p>\n

Subsequent to the issuance of the determinations described above, AIG
\nnotified the Office of the Special Master that revised calculations revealed the
\nmisidentification of one member in each of the 2010 groups. As a result of this
\nmisidentification, no compensation structure or payments were proposed for an
\nomitted Top 25 executive and no compensation structure was proposed for an
\nomitted employee in the Covered Employees 26:100 group. On August 2, 2010, AIG
\nsubmitted proposals for the omitted executives:its representatives having
\npreviously discussed the substance of the proposal with the Office of the
\nSpecial Master:and requested a determination that any payments under the
\nproposals would be consistent with the Public Interest Standard.<\/p>\n<\/p>\n

The proposed pay package for the omitted Top 25 executive conforms to the
\ncompensation structures that the Special Master approved in the Top 25
\nDetermination. The amounts potentially payable to the Top 25 executive under the
\nproposal have also been reviewed by the Office of the Special Master to assess
\nwhether such amounts are consistent with amounts payable to persons in similar
\npositions or roles at similar entities that are similarly situated. See id.
\n<\/em> \u00a7 30.16(b)(1)(v). In light of this review, the Special Master has concluded
\nthat these amounts “appropriately, reflect [the executive153s] prospective
\ncontributions…to the value of the exceptional assistance recipient.” Id.
\n<\/em> \u00a7 30.16(b)(1)(vi). Accordingly, the Special Master has determined that the
\ncompensation structure proposed for this executive, as described in
\nExhibit I,<\/em><\/strong> is consistent with the Public Interest
\nStandard.<\/p>\n<\/p>\n

The proposed compensation structure for the omitted employee from the Covered
\nEmployees 26:100 group is consistent with the requirements of the 26:100
\nDetermination. Accordingly, the Special Master has determined that AIG153s
\nproposed 2010 compensation structure for this executive is consistent with the
\nPublic Interest Standard.<\/p>\n<\/p>\n

2. New Executive Officer<\/u><\/p>\n<\/p>\n

Subsequent to the issuance of the 26:100 Determination, AIG also informed the
\nOffice of the Special Master that it had identified a potential candidate for an
\nAIG executive officer position, serving as the Executive Chairman of American
\nInternational Assurance Company Limited (the “AIA Executive”). On July 17, 2010,
\nAIG submitted a proposed compensation structure and requested a determination
\nthat the proposed structure is consistent with the Public Interest Standard.
\nUnder the proposal, which is consistent with the requirements of the 26:100
\nDetermination and compensation structures previously approved by the Special
\nMaster for incoming AIG executive officers, the AIA Executive would be eligible
\nto receive cash salary, cash and stock incentives, and other benefits (including
\neligibility under AIG153s Executive Severance Plan) on the same terms and
\nconditions as current executives of AIG in the Covered Employees 26-100 group.
\nAccordingly, the Special Master has determined that AIG153s proposed 2010
\ncompensation structure for the AIA Executive is consistent with the Public
\nInterest Standard.<\/p>\n<\/p>\n

AIG153s submission for the AIA Executive also proposes compensation structures
\nfor 2011 and 2012, and contemplates that the AIA Executive may become a Top 25
\nexecutive for 2012. The proposed 2011 and 2012 compensation structures generally
\nconform with the compensation structures the Special Master has approved for
\nexecutives in the Covered Employees 26:100 group and Top 25 executives,
\nrespectively. Accordingly, the Special Master has concluded in<\/p>\n

\n

2<\/p>\n

\n

<\/p>\n

\n

principle that the proposed 2011 and 2012 compensation structures and amounts
\npotentially payable under them would be consistent with the Public Interest
\nStandard. Notwithstanding the foregoing, however, the Special Master153s final
\ndetermination under the Rule regarding the AIA Executive153s compensation
\nstructures and payments in any year after 2010 will not be made prior to the
\nregular review of AIG153s compensation proposals for that year, and will be based
\non the totality of the facts and circumstances at that time.<\/p>\n<\/p>\n

3. Compensation Structure for a Covered Employee<\/u><\/p>\n<\/p>\n

On August 2, 2010, AIG also submitted a proposal regarding the compensation
\nstructure of a certain employee in the Covered Employees 26:100 group (the
\n“Covered Employee”). At the time of the 26:100 Determination, it was anticipated
\nthat the Covered Employee would fall within the Rule153s “safe harbor” provision,
\nwhich provides automatic approval for compensation structures resulting in
\n$500,000 or less in “annual compensation” (excluding long-term restricted
\nstock). See id. \u00a7 <\/em>30.16(a)(3)(ii). According to AIG, it is now
\nanticipated that the Covered Employee153s “annual compensation” may exceed
\n$500,000, due to his performance under sales commission plans. Notwithstanding
\nthe stock and long-term allocation requirements of the 26:100 Determination, AIG
\nhas requested approval to continue paying the Covered Employee under these
\nprograms (along with a minimal cash base salary ). AIG has noted the
\nlong-established and predominant use of commission programs to compensate sales
\nemployees in positions similar to the Covered Employee153s, and confirmed that
\npayments under the program would qualify as “commission compensation” under the
\nRule.<\/p>\n<\/p>\n

The Special Master considered the proposal in light of the Rule153s exclusion
\nof reasonable “commission compensation” from the restrictions applicable to
\nbonus and incentive compensation, see id. <\/em> \u00a7 30.1, and the principle
\nthat compensation structures should be consistent with those provided to
\n“persons in similar positions or roles at similar entities…competing in the
\nsame markets” as a covered employee. Accordingly, the Special Master has
\ndetermined that the payment of qualified “commission compensation” to the
\nCovered Employee under the programs (in addition to a minimal base salary) is
\nnot inconsistent with the Public Interest Standard, provided that any other
\ncompensation structure of the Covered Employee comply with the requirements of
\nthe 26:100 Determination.<\/p>\n<\/p>\n

4. Guidance Regarding the 26:100 Determination<\/u><\/p>\n<\/p>\n

The 26:100 Determination requires that employees in the Covered Employees
\n26:100 group be paid no more than $25,000 in perquisites and “other”
\ncompensation, absent exceptional circumstances for good cause shown. With
\nrespect to an individual employee in the Covered Employees 26:100 group, a
\nrelocation undertaken at the request of the company constitutes exceptional
\ncircumstances, and such circumstances constitute good cause for the company to
\npay such employee153s reasonable relocation expenses under a program that provides
\nsuch benefits on the same basis to similarly situated employees; provided,
\nhowever, that a tax gross-up is not a reasonable relocation expense.<\/p>\n<\/p>\n

The approvals in this letter apply only to the proposals in respect of the
\nexecutives addressed in sections 1, 2 and 3. Such conclusions are limited to the
\nauthority vested in the Special Master by Section 30.16(a)(3) of the Rule, and
\nshall not constitute, or be construed to<\/p>\n

\n

3<\/p>\n

\n

constitute, the judgment of the Office of the Special Master or the
\nDepartment of the Treasury with respect to the compliance of the proposed
\ncompensation structure or any other compensation structure for the subject
\nemployee with any other provision of the Rule. Moreover, the Special Master153s
\nevaluations and conclusions have relied upon, and are qualified in their
\nentirety by, the accuracy of the materials submitted by AIG to the Office of the
\nSpecial Master, and the absence of any material misstatement or omission in such
\nmaterials.<\/p>\n<\/p>\n\n\n\n\n\n\n\n\n\n\n\n
\n<\/td>\n\n

Very truly yours,<\/p>\n<\/td>\n<\/tr>\n

\n<\/td>\n\n<\/td>\n<\/tr>\n
\n<\/td>\n\n

\/s\/ Kenneth R. Feinberg<\/p>\n<\/td>\n<\/tr>\n

\n<\/td>\n\n

Kenneth R. Feinberg<\/p>\n<\/td>\n<\/tr>\n

\n<\/td>\n\n

Office of the Special Master<\/p>\n<\/td>\n<\/tr>\n

\n<\/td>\n\n

for TARP Executive Compensation<\/p>\n<\/td>\n<\/tr>\n

\n<\/td>\n\n<\/td>\n<\/tr>\n
\n

cc: Robert H. Benmosche<\/p>\n<\/td>\n

\n<\/td>\n<\/tr>\n
\n

Marc Trevino, Esq.<\/p>\n<\/td>\n

\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\n

4<\/p>\n

\n

<\/p>\n

\n

EXHIBIT I
\nSUPPLEMENTAL DETERMINATION<\/strong><\/p>\n

\n\n\n\n\n\n\n\n\n\n
\n

Top 25 Executive 2010 compensation structure:<\/u><\/strong><\/p>\n<\/td>\n<\/tr>\n

\n<\/td>\n\n<\/td>\n\n<\/td>\n<\/tr>\n
\n

Cash salary<\/strong><\/p>\n<\/td>\n

\n<\/td>\n\n

$400,000 (prospective annual rate)<\/p>\n<\/td>\n<\/tr>\n

\n<\/td>\n\n<\/td>\n\n<\/td>\n<\/tr>\n
\n

Stock salary<\/strong><\/p>\n<\/td>\n

\n<\/td>\n\n

$800,000 (annual rate, payable on a nunc pro tunc <\/em>basis effective
\nJanuary 1, 2010).<\/p>\n<\/td>\n<\/tr>\n

\n<\/td>\n\n<\/td>\n\n<\/td>\n<\/tr>\n
\n

Long-term restricted stock<\/strong><\/p>\n<\/td>\n

\n<\/td>\n\n

$300,000 (2010 target amount; in addition, subject to the limitations of the
\nRule, a long-term restricted stock grant of up to $850,000 may be granted with
\nrespect to 2009 service in consideration of the cancellation of incentive
\npayments upon the identification of the executive as a member of the Top 25.)\n<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The terms and conditions of the Top 25 Determination regarding the
\ncompensation structures and amounts potentially payable thereunder to the
\nnon-AIGFP Covered Employees (as defined in the Top 25 Determination) shall apply
\nto the Top 25 Executive.<\/p>\n

\n

E1<\/p>\n

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