AIG overhauls staff incentive pay with tiered scale

American International Group Inc., the insurer criticized by lawmakers for giving bonuses to executives after a U.S. bailout, started an incentive plan that will give the top 10% of employees the largest awards.

AIG’s plan will rank employees on a scale of 1 to 4 based on performance compared with colleagues, a spokeswoman said. About 10% of the New York- based company’s workers will be placed in the top rank, getting the biggest incentive payments, while 70% will fall in the middle tiers, she said. The bottom 20% of performers will get the lowest payouts.

Chief Executive Robert Benmosche, 65, must retain valued employees while responding to lawmakers who said the insurer rewarded employees without regard to performance. A backlash about bonuses given to employees in the AIG derivatives unit blamed for the company’s losses peaked in March with President Barack Obama criticizing the awards.

The insurer is beginning the plan with a few thousand employees before implementing it firmwide.

Benmosche told employees in an Aug. 4 meeting that he was preparing a new compensation plan and sought to get Kenneth Feinberg, the Obama administration’s special master for executive compensation, to approve of it. Benmosche secured an annual salary of $3 million in cash, $4 million in shares, and as much as $3.5 million in long-term incentive awards.

“I want to make sure we all get paid competitively,” he said, according to a recording of the event. “If you shoot the lights out in a given year, we should have enough flexibility to give you a big increase.”