AIG's Top Lawyer Walks Away with Millions in Severance
The Wall Street Journalreports that "AIG determined that its top in-house lawyer was entitled to the money under the company's severance plan, whose terms say certain executives can resign and collect severance if their pay is reduced significantly." For the insurance firm's general counsel, Anastasia Kelly, that severance will be well into the millions of dollars.The news raises the question once again of the wisdom of pay caps imposed at U.S. firms that have taken government financial assistance and not yet paid it back. Pay czar Kenneth Feinberg has limited many base salaries at these firms to $500,000. This is well below what most executives on Wall Street are accustomed to making. Critics of Feinberg say that his parsimony will force a number of managers to leave companies like AIG and move to banks and hedge funds that are not subject to pay caps.
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Feinberg has made some exceptions to his compensation restrictions, but in the case of the AIG general counsel, he does not appear willing to bend. At GM, Feinberg allowed new CFO Chris Liddell to take a pay package that will be over $6 million in his first year at the car company. Liddell, a former CFO from Microsoft (MSFT), may not have been willing to move to Detroit for less.
Feinberg is creating a problem for himself by stretching the rules for some executives and not for others. Boards at companies like AIG will almost certainly argue that their key managers are as important to them as Liddell is to GM. That erodes Feinberg's authority and ensures that his decisions will continue to be challenged.