Five senior executives at American International Group (AIG), the bailed-out American insurer, have threatened to quit if their compensation is cut, as the bonus rebellion erupted on both sides of the Atlantic.
Executives at AIG, the US insurer that is surviving on $182 billion in Government support, fear that Kenneth Feinberg, the White House’s Pay Czar, will reduce their pay in his next round of cuts to be announced within a fortnight.
The Wall Street Journal (WSJ) reported that Anastasia Kelly, AIG’s general counsel, Rodney Martin, who runs one of AIG’s international life insurance business, and William Dooley, who oversees AIG’s financial services arm, handed in notice on December 1 that they were prepared to leave by the end of the year if Mr Feinberg restricted their 2009 and 2010 compensation packages.
Nicholas Walsh, the head of the international general insurance business at AIG, and John Doyle, the head of US general insurance, also handed in notice but withdrew their threat at the weekend, the WSJ reported.
The row echoes last week’s rift between the Treasury and Royal Bank of Scotland, which is soon to be 83 per cent-owned by the British taxpayer, which was accused of holding taxpayers to ransom after its board threatened to resign en masse if the Government blocked huge bonus payments.
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The Treasury has demanded a veto on the bank’s estimated £1.5 billion bonus pool for staff at the group’s investment arm. The pool is about 50 per cent bigger than last year and would give 20,000 bankers the equivalent of three times the national average salary each.
In October, the US Pay Czar, who is charged with overseeing compensation at the seven companies with the biggest taxpayer bailouts, cut compensation for AIG’s 13 highest-paid employees by 57 per cent, including limiting most of their base salaries to $500,000 or less.
In the next two weeks Mr Feinberg is expected to reveal his decision on pay cuts for the next 75 highest-paid employees.
Last month Robert Benmosche, AIG’s chief executive, reportedly threatened to quit in frustration over the company’s talks with the Pay Czar, who is juggling the Government’s to appease voters by reducing bonuses with the need to retain employees who are key to the recovery of companies in which taxpayers hold large stakes.
Mr Feinberg reviewed the pay of the 25 highest-paid employees at all seven bailed-out companies but at AIG there were just 13 left by the time his decision was announced. The other 12 had already left the company and Mr Benmosche has argued that AIG will not be able to repay taxpayers if it continued to lose key staff.
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Meanwhile, the British banking industry hit back at a Treasury plan for a “supertax” on bonuses, which executives warned would damage the City’s reputation as a financial centre.
Angela Knight, chief executive of the British Bankers’ Association (BBA), said: “We need to think not just about the individuals but about the business that will be done elsewhere.
“We need to think about the message this will send outside the UK about Britain being a place to do business in.”
It emerged at the weekend that Alistair Darling is preparing to introduce a punitive new tax on bankers’ bonuses in his Pre-Budget Report on Wednesday.
More than 1,000 investment bankers have already quit RBS for guaranteed bonuses and higher salaries at other banks, The Sunday Times reported.