American International Group Inc. (AIG) intends to pay millions toward severance to its departing general counsel Anastasia Kelly. Kelly recently resigned due to federal pay restraints on her compensation.
Kelly was among the five executives who notified on Dec 1, 2009, that they would resign and collect severance benefits if their pay was cut significantly by the U.S. pay czar. The other four executives withdrew their notices later.
The pay czar is in charge of deciding compensation packages for the highest-paid employees at all the firms that received bailout money. In his latest step, the pay czar capped annual cash salaries at $500,000 for top executives at the firms that have not repaid the bailout money yet.
However, the pay czar said last week that he has revised his decision on pay limitations for a top executive of AIG as the executive has decided to remain with the company.
Recently, in a major revelation, the chief of AIG disclosed its intention of repaying the Troubled Asset Relief Program (TARP) loan back to the U.S. government within the next two years. For this, AIG expects to use earnings from business operations and also by disposing unnecessary businesses in the near term.
The CEO Robert Benmosche believes that if AIG gets more time for repayment, it will be in a better position to repay in full without sacrificing its major assets and businesses. Also, over time the restructuring effort will significantly contribute to the earnings. However, taking more time will also mean paying out more interest on the loans taken.
Moreover, other concerns that need attention are the improvement in overall aggressive managerial efficiency, regenerating confidence among the dispirited staff and withstanding consistent pressure from the U.S. government to sell assets quickly to repay debt. These issues have to be dealt with head-on immediately to prevent AIG from collapsing.
On Monday, AIG shares shot up by about 4.6% on the New York Stock Exchange, on heavy volumes, closing at $31.50.
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