Business

AIG plans revamp on incentive pay

American International Group Inc. is rolling out a plan to revamp how it doles out annual incentive pay to its employees, the Wall Street Journal reported Wednesday. The move comes as the government-controlled insurance giant moves away from retention bonuses that have proved controversial over the past year.

The new initiative, called a “forced distribution” system, is being pushed by Chief Executive Robert Benmosche. Under the plan, thousands of AIG employees will be ranked on a scale of 1 to 4 based on their performance relative to their peers, and their annual variable compensation, which may include bonuses, will be determined by their rank. Individuals ranked in the top 10 percent will get far more relative to their peers.

Similar forced-ranking systems have been used by large companies such as General Electric Co. to reward top performers and to weed out underperforming employees over time.

AIG is struggling to repay more than $90 billion in U.S. taxpayer money and has lost a number of key employees since its September 2008 bailout, which continues to attract negative publicity.

The move could help appease AIG’s overseer on compensation issues, U.S. pay czar Kenneth Feinberg, who has taken issue with AIG’s previous plans to pay retention bonuses to some executives at the corporate level and insurance units so long as they stayed at the company.

In the past, Benmosche has said performance-appraisal systems previously in place at AIG weren’t discriminating enough.

To read more, go to WSJ.com.