Obama's Pay Czar Releases New Rulings on Executive Pay

"I and the Board are indeed frustrated and we are in ongoing discussions with Treasury and the Special Master to resolve the uncertainty surrounding this issue," Benmosche said. "We are all working aggressively to overcome this compensation barrier that stands in the way of restoring AIG's value and allowing us to live up to our obligations to all stakeholders."

A source familiar with AIG's situation acknowledged that Benmosche and Feinberg had "a real difference in opinion" in discussions about what constitutes acceptable pay packages at the company. However, the source stated, the two men now have "a good constructive relationship."

Benmosche's concerns stem from a fear that his company will be unable to attract and retain top talent in a competitive industry. When Feinberg issued his initial rulings in October on compensation for the 25 highest-paid employees at the seven institutions, only 13 AIG employees were affected because the other 12 had left the company.

But in his own defense, Feinberg said he's mindful of companies' needing to maintain their competitiveness.

"In establishing compensation practices and principles, I am very cognizant of the need for these companies to thrive and succeed and that is an element, a very important element of what I'm doing," he said.

Still, Feinberg in October cut AIG's cash payments by $34 million, a 90 percent drop from 2008 levels. The company's total direct compensation to the 25 executives was slashed by $28 million, a drop of 57 percent.

Feinberg also is working to reduce $198 million in retention payments that the company is set to hand out this March, after the insurance giant came under fire for dishing out $165 million in retention payments last March.

Such actions stem from two primary goals, Feinberg said. "One, get the taxpayers' money back," he said. "The secretary of Treasury has made it very clear that that's the primary objective; to repay the taxpayer.

"Bank of America has done it, Citigroup may be doing it," he said, "and I think that is very, very good news.

"Secondly, develop the series of principles, governing compensation, that will not only impact the companies under my jurisdiction, but like Goldman [Sachs], begin, maybe, to adopt some of those very principles that we've annunciated and have a broader impact than just the seven companies under my jurisdiction."

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