AIG, the US insurance giant, has appointed David Herzog executive vice president and chief financial officer (CFO), replacing the acting CFO, Steven Bensinger, who will leave the company. The announcement followed a letter from the New York attorney general Andrew Cuomo to the AIG board, demanding stringent curbs on executive compensation.Herzog joined AIG in 2000 and has been senior vice president and comptroller since 2005. His new responsibilities include reassessing AIG’s capital structure, undertaking a comprehensive review of the firm’s expenses and practices, and overseeing payments on its credit facility from the Federal Reserve, currently worth $122.5 billion. Herzog will report to Edward Liddy, the company’s chairman and chief executive officer.
Bensinger joined AIG in 2002, and had held the posts of vice chairman in financial services and acting CFO since May 2008. But on October 15 Cuomo wrote to AIG's board criticising “unwarranted and outrageous expenditures” at the company, and insisting that AIG “review, rescind, and recover all improper payments” made to executive staff members.
The next day, AIG issued a joint statement with the attorney general’s office, outlining a series of measures to address executive perks.
First, it will help the attorney general review, and where appropriate recover, compensation paid to senior officials. Former chief executive officer Martin Sullivan received a $5 million cash bonus and $15 million golden parachute when he left in June, despite escalating losses suffered by the company. Joseph Cassano, who headed the financial products unit, which generated the majority of AIG’s losses, departed in February with $34 million in bonuses.
AIG will also set up a special governance committee to oversee new expense management controls, and will also take a number of immediate actions. These include Bensinger’s dismissal, and a refusal to pay him a multi-million dollar severance package. The company will also cancel a series of conferences and events that would have cost over $8 million. AIG was heavily criticised for holding a $440,000 conference in California after the $85 billion taxpayer bailout was announced.
Liddy affirmed that AIG “will fully cooperate” with the attorney general’s office, underlining the insurer’s commitment “to rebuilding its business and paying back the US taxpayer”.
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