Does anyone who can't send a baseball into orbit, create the next hit YouTube video or cure cancer "deserve" to be paid $7 million ? I am not sure.
But what I can say is that paying that level of salary to American International Group Inc. (AIG) Chief Executive Robert Benmosche seems reasonable. That is the view of the Obama administration's pay czar Kenneth Feinberg, who is charged with making sure that firms that received federal money don't unjustly enrich themselves. It seems like a noble albeit losing cause.
AIG, which has already gotten more than $180 billion from Uncle Sam, already tried the public service argument. Former head Ed Liddy, a well-respected retired CEO of Allstate Cop. (ALL), took the job at the government's behest for a salary of $1. What was his reward? Liddy got regularly slapped around by members of Congress and the media over some ill-advised corporate travel expenditures. It really did not matter that these events at posh resorts were inconsequential to the bottom line, they looked bad. In Washington, perception is reality.
Little wonder that Liddy tendered his resignation. It is even less shocking that Benmosche was not as civic-minded as his predecessor. Benmosche is eligible for bonus of $3.5 million. He already is plenty wealthy after retiring as the head of MetLife in 2006 after nine years at the helm. AIG, which has had five CEOs since 2005, needs Benmosche more than he needs another job.
As hard as it may be to believe, Benmosche is not getting paid too much though, even if it is certainly more than most people can dream of earning. Are CEOs paid too much as a general proposition? Absolutely. Oracle Corp. (ORCL) CEO Larry Ellison received more than $556 million in pay, Occidental Petroleum Corp.'s (OXY) Ray Irani earned $222.64 million while Hess Corp.'s (HES) John B. Hess was paid $154.58 million. Shares of all three companies are down over the past year.
Benmosche wanted to be fairly compensated to leave his cushy retirement, and who can blame him. Liddy found out that running New York-based AIG is a difficult and thankless task made even more difficult considering the insurer's terrible financial shape.
If this works out, the government's $7 million investment in Benmosche will pay off many fold. Until it does, he will earn every nickel of his salary.
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