AIG 2007 Annual Report Download - page 241

American International Group, Inc. and Subsidiaries
17. Share-based Employee Compensation Plans AIG DCPPP
Continued In September 2005, AIG adopted the AIG DCPPP to provide share-
based compensation to key AIG employees, including senior
Employee Stock Purchase Plan executive officers. The AIG DCPPP was modeled on the SICO
Plans.
AIG’s 1996 Plan provides that eligible employees (those employed
The AIG DCPPP contingently allocated a fixed number of time-
at least one year) may receive privileges to purchase up to an
vested RSUs to each participant if AIG’s cumulative adjusted
aggregate of 10,000,000 shares of AIG common stock, at a price
earnings per share in 2005 and 2006 exceeded that in 2003 and
equal to 85 percent of the fair market value on the date of the
2004 as determined by AIG’s Compensation Committee. This goal
grant of the purchase privilege. Purchase privileges are granted
was met, and pursuant to the terms of the DCPPP Plan,
quarterly and are limited to the number of whole shares that can
3,696,836 time-vested RSUs were awarded in 2007. These RSUs
be purchased on an annual basis by an amount equal to the
vest in three pre-retirement installments and a final retirement
lesser of 10 percent of an employee’s annual salary or $10,000.
installment at age 65.
At December 31, 2007, RSU awards with respect to
SICO Plans
3,272,268 shares remained outstanding.
The SICO Plans provide that shares of AIG common stock
currently held by SICO are set aside for the benefit of the AIG Partners Plan
participant and distributed upon retirement. The SICO Board of
On June 26, 2006, AIG’s Compensation Committee approved two
Directors currently may permit an early payout of shares under
grants under the AIG Partners Plan. The first grant had a
certain circumstances. Prior to payout, the participant is not
performance period that ran from January 1, 2006 through
entitled to vote, dispose of or receive dividends with respect to
December 31, 2007. The second grant has a performance period
such shares, and shares are subject to forfeiture under certain
that runs from January 1, 2007 through December 31, 2008. In
conditions, including but not limited to the participant’s termina-
December 2007, the Compensation Committee approved a grant
tion of employment with AIG prior to normal retirement age.
with a performance period from January 1, 2008 through
Historically, SICO’s Board of Directors could elect to pay a
December 31, 2009. The Compensation Committee will approve
participant cash in lieu of shares of AIG common stock. On
the performance metrics for this grant in the first quarter of
December 9, 2005, SICO notified participants that essentially all
2008. All grants vest 50 percent on the fourth and sixth
subsequent distributions would be made only in shares, and not
anniversaries of the first day of the related performance period.
cash. At that date, AIG modified its accounting for the SICO Plans
The Compensation Committee approved the per formance metrics
from variable to fixed measurement accounting. Variable measure-
for the first two grants prior to the date of grant. The measure-
ment accounting is used for those few awards for which cash
ment of the first two grants is deemed to have occurred on
elections had been made prior to March 2005. At December 9,
June 26, 2006 when there was mutual understanding of the key
2005, there were 12,650,292 non-vested AIG shares under the
terms and conditions of the first two grants. In 2007, no
SICO Plans with a weighted average fair value per share of
compensation cost was recognized, and compensation cost
$61.92. The SICO Plans are also described in Note 19 herein.
recognized in 2006 was reversed, for the first grant under the
Although none of the costs of the various benefits provided
Partners Plan because the performance threshold for these
under the SICO Plans have been paid by AIG, AIG has recorded
awards was not met.
compensation expense for the deferred compensation amounts
payable to AIG employees by SICO, with an offsetting amount
credited to additional paid-in capital reflecting amounts deemed Valuation
contributed by SICO. The fair value of each award granted under the plans described
A significant portion of the awards under the SICO Plans vest above is based on the closing price of AIG stock on the date of
the year after the participant reaches age 65, provided that the grant.
participant remains employed by AIG through age 65. The portion
of the awards for which early payout is available vest on the
applicable payout date.
AIG 2007 Form 10-K 187