Annual Meeting May 10, 2023

The total compensation for AIG’s Chairman and CEO, Peter Zaffino, was $75,314,199 for 2022. This was largely made up of an extraordinary equity award. The combined value of 2022 PSUs based on target performance, the 2022 RSUs and special 2022 RSUs granted to certain named executives, and the 2022 stock options was estimated at $62,422,889.

Of that amount, $50 million was in restricted stock units that the board approved when it signed the five-year contract signed by Zaffino in November. Such long-term employment agreements are less routine than they once were. In this case, the company reported Special RSU Grant will cliff vest in full on November 10, 2027, “subject to Mr. Zaffino’s continued employment with AIG through such date.” In other words, this pay is linked not to specific performance hurdles, but just to time served. Should the share price of AIG fall 50% in the first year, Zaffino will still receive a massive payout; should the price of the stock fall 90% he will still receive a generous payout. Shareholders have no such guarantees.

AIG has appeared on the list of 100 Most Overpaid CEOs in three of the last nine years. In the most recent report the company was not on the list, but was close to it, ranking as number 131. That was when the compensation was a quarter of what it was this year.

According to a Financial Times article, “AIG investors urged to oppose chief’s $50mn pay award”, both Glass Lewis and ISS have recommended that shareholders vote against the compensation package. In particular, Glass Lewis described Zaffino’s pay as “well above the median of Glass Lewis peers and [the company’s] self-disclosed peers, without sufficient rationale.” ISS raised similar concerns: “There is a general expectation that large off-cycle awards should be largely conditioned on the achievement of rigorous multi-year performance criteria in recognition of the additional pay opportunities they provide.”

I also note that proxy statement disclosure regarding engagement falls well below that of other S&P 500 companies.