AIG spokeswoman Cindy Leggett-Flynn declined to comment on Duperreault’s compensation or the other payments required to bring him on board.
But there can be risks to big pay packages if they do not properly incentivize executives, pay consultants said.
AIG learned that the hard way when it nearly collapsed in 2008 due to massive exposure to derivatives based on plunging property prices, and needed a $182 billion taxpayer-funded bailout by the Federal Reserve and U.S. Treasury.
After that, AIG withheld awards from some executives for inappropriate risk-taking, and paid its new CEO a nominal $1 salary in 2008. The company kept a lid on CEO pay throughout the period it was supported by the U.S. government, which ended in 2013.
For a graphic showing AIG CEO pay since 2004, click on http://tmsnrt.rs/2fSflV9
Corporate governance experts said they were most concerned about the structure of Duperreault’s longer-term stock option awards.
To cash in the maximum number of his stock options, he must raise AIG’s stock price by $30, or about 50 percent of its current value, within the next seven years and it must stay at that level for 20 consecutive trading days. The earliest he could exercise all his options, if the share price hits certain levels, would be three years.
That could encourage aggressive risk-taking for short-term profits that ultimately harm the company, some experts said.
Duperreault’s options could vest more quickly than it may take for long-term risks he takes on to become apparent, said Adam Kolasinski, an executive compensation expert who teaches finance at Texas A&M University.
