AIG CEO Rejects $22 Million Parachute; Will Others Follow?

Sept. 23, 2008 — -- Who in his right mind would walk way from an eight-figure severance package? Try AIG's Robert Willumstad.

Willumstad, 63, served as the chief executive officer of ailing insurance giant American International Group from June until he was replaced earlier this month. He was eligible for a severance package of $22 million, but in a Sunday e-mail to his successor, Edward Liddy, he said that he would decline the package.

"I prefer not to receive severance payments while shareholders and employees have lost considerable value in their AIG shares," he wrote in an e-mail, according to a person familiar with the situation.

How do you feel about the government's bailout plans? Tell ABC News

Given this year's turmoil in the stock and credit markets, AIG is far from the only firm to see massive drops in share value. But don't expect executives from other financial firms to follow Willumstad's example, at least not voluntarily, said Robert Reich, the former U.S. labor secretary under President Clinton and a professor of public policy at the University of California at Berkeley.

"I don't think anyone should really count on CEOs voluntarily forgoing anything," Reich said. "Why should we accept a sudden conversion on the part of America's CEOs, especially financial executives who have been raking in so much money over the last decade."

But even if executives don't volunteer to have their compensation packages reduced, new federal legislation may do it for them: Some members of Congress are seeking to have limits placed on the compensation for executives of companies that participate in the $700 billion bailout plan now being crafted by the federal government.

The rescue plan would allow the federal government to buy the bad assets -- namely, mortgage investments -- held by financial firms, thereby allowing the firms to free up their balance sheets and conduct other business.

"We are doing this because a lack of regulation allowed the private sector to make a lot of big mistakes," Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, told ABC News in reference to efforts to establish compensation limits.

"The very people who made the big mistakes -- they may not be bad people, but they made some big mistakes -- they're the reason we have to put this money in," Frank said. "It certainly can't be a harsh thing to tell them they can't pay themselves as much as they used to."