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.
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."
Compensation and Giving Back
If other departing chief executives are considering declining multimillion-dollar packages, they're not talking. Requests by ABCNews.com to interview Richard Fuld, the chief executive of Lehman Brothers, the now-bankrupt brokerage firm, did not receive a response. A spokeswoman for Merrill Lynch, the brokerage firm just purchased by Bank of America, said that Merrill's CEO, John Thain, was unavailable for an interview.
Before Lehman's bankruptcy, Fuld would have been eligible to receive more than $20 million upon leaving Lehman -- $16.8 million in pension benefits and $5.6 million in deferred compensation -- according to David Schmidt of James F. Reda & Associates, an Atlanta-based executive compensation consulting firm.
Schmidt said that it is expected that, through bankruptcy proceedings, Fuld would still receive more than half of what he was originally due.
Merrill's Thain is eligible for between $9 million and $11 million in stock holdings, if not more, Schmidt said. A person familiar with the situation at Merrill said that Thain's severance was not under discussion because Thain is still employed by Merrill Lynch.
Willumstad's decision to forgo some compensation was not exactly unique, however. In June, Fuld and Lehman President Bart McDade reportedly gave up their 2008 bonuses.
The year before, Kerry Killinger, the then-CEO of Washington Mutual, declined to take a bonus. Still, Killinger was "making [up] for lost time" when he stood to receive as much as $22 million in severance as he prepared to leave WaMu last month, according to Conde Nast Portfolio.com.
Attempts to reach Killinger were unsuccessful.
Killinger's salary and other compensation -- a total of $1.4 million by the end of 2007 -- was actually substantially lower than those of chief executives at other financial firms, including AIG's Willumstad. He earned $10.9 million in 2007, according to the California-based executive compensation firm Equilar.
Taking Away Millions From Fannie, Freddie CEOs
Merrill's Thain, meanwhile, took home $15 million in 2007, according to Equilar, while former Merrill CEO Stanley O'Neal received $11.3 million and former Bear Stearns chief James Cayne, whose firm had the dubious distinction of receiving the first major government bailout of the year, received $11 million.
Fuld emerged as among the most highly paid Wall Street-ers, with a whopping $45.4 million in salary, bonuses and other compensation in 2007.
O'Neal declined a request for an interview. Attempts to reach Cayne were unsuccessful.
"What we've experienced over the last few years," said Reich, "is the same kind of anything goes get-rich quick executive compensation that we last saw in the late 1920s, and of course in 1929 we had the great crash."
Reich said that the cases in which executives cut back on their compensation were symbolic. Overall, he said, Americans shouldn't expect to see more chief executives cutting back on their own pay unless there's a "law requiring them to do so" -- like the measure under consideration by Congress and advocated by Frank and other elected officials.
Actions by the Federal Housing Finance Administration may prefigure compensation limits set by Congress.
Last week, the FHFA announced that it would not pay the former heads of mortgage giants Fannie Mae and Freddie Mac the packages that they were originally set to receive before the struggling companies were put into government conservatorship this summer.
The FHFA, clarifying information that it had previously released about compensation for former Freddie CEO Richard Syron and former Fannie CEO Daniel Mudd, told ABCNews.com that Syron would not receive $10.3 million in salary, bonus and payments in lieu of stock grants, as had originally been called for in his contract. He will, however, still receive $4 million in pension payments and 401(k) investments.
Mudd, the FHFA said, will not receive $2 million in salary and $300,000 in stock grants, as had originally been expected. But he will, the agency said, receive $5.6 million through his pension and 401(k) investments.
Overall, the two men, while still benefiting from seven-figure packages, will walk away with $12.6 million less than originally planned.
Syron's lawyer did not return a call for comment. Attempts to reach Mudd were unsuccessful.
With reports from ABC News' Jake Tapper and Zunaira Zaki.