AIG overhauls incentive pay system

NEW YORK—American International Group Inc. has established a new performance-based incentive compensation plan for its employees, a spokesman for the company confirmed Thursday.

The system is based on four rankings determined by employees' performance compared with their peers. Those ranked in the top 10% of the employees will receive the greatest incentive pay, followed by those ranked in the next 20%, the next 50% and the remaining 20%.

The plan affects 2010 compensation.

“We recently launched a performance management initiative that aims to bring greater alignment between an individual's performance and compensation,” the AIG spokesman said in an e-mail.

“The first step toward building a high-performance management culture is implementing relative performance ratings that will compare an individual's performance to that of others in his or her peer group. These ratings will help ensure that our people are accountable, recognized and rewarded for their achievements,” he added.

AIG came under fire from the public and Capitol Hill for $165 million in retention payments it paid last year to employees of AIG Financial Products Corp., the unit blamed for the company's near-collapse in September 2008 and resulting in the federal government taking a nearly 80% ownership stake in the company.

AIG, which said it was contractually obligated to make the payments last year, is paying smaller amounts to employees of the unit this month.