AIG staff agree to bonus cuts in return for early payment

3 February 2010

Staff in American International Group's (AIG) financial products unit have agreed to reduce their bonuses by as much as 20 per cent in return for early payment.

The agreements, made by the vast majority of employees working in the division, will save AIG around $20 million – but it will still be paying out about $100 million to 200 employees.

Those who have agreed to the deal, which has seen many accept ten to 20 per cent cuts in how much they will get, will now receive payment this week rather than in March, the originally intended date.

AIG has faced heavy criticism over the planned bonus payouts to staff in the unit - which was responsible for the huge credit losses from derivatives trading that forced the company into seeking bailout funding from the US government.

But the financial institution has expressed its hope that the pay reductions will head off further complaints.

"We are greatly appreciative that virtually all – some 97 per cent – of active financial product employees have volunteered to reduce their upcoming 2010 payment to help achieve our giveback target," a company statement said.

AIG added that some former members of staff due to receive payments have also agreed to bonus cuts.

"The reductions from these two groups stand at about $20 million and we believe this allows us to largely put this matter behind us," it was added.

Last month, further controversy about AIG's additional payments to its financial products unit was stoked when a company insider told Reuters that around 40 per cent of those in line to receive the upcoming bonuses no longer worked for the firm.

AIG did not reveal what percentage of ex-employees had agreed to the cuts but added it would continue negotiating with its former staff members about how much they will receive in bonuses over the coming months.

By Asim Shah

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