AIG 2010 Annual Report Download - page 53

American International Group, Inc., and Subsidiaries
• the right to engage in at-the-market offerings; and
• subject to certain exceptions, the right to approve the terms, conditions and pricing of any registered offering
in which it participates until its ownership falls below 33 percent of our voting securities.
Possible future sales of AIG Common Stock by the Department of the Treasury could adversely affect the market for
AIG Common Stock. We have granted the Department of the Treasury the registration rights described above.
Although we can make no prediction as to the effect, if any, that sales by the Department of the Treasury would
have on the market price of AIG Common Stock, sales of substantial amounts of AIG Common Stock, or the
perception that such sales could occur, could adversely affect the market price of AIG Common Stock.
Employees
Mr. Benmosche may be unable to continue to provide services to AIG due to his health. Mr. Robert Benmosche,
the President and Chief Executive Officer of AIG, has been diagnosed with cancer and has been undergoing
treatment for his disease. Following a briefing by a physician fully aware of Mr. Benmosche’s medical condition,
test results, and prognosis, the AIG Board of Directors, while recognizing that in matters of cancer circumstances
can change, anticipates that Mr. Benmosche should be able to serve in his role as AIG President and CEO over
the next twelve to eighteen months. However, Mr. Benmosche’s condition may change and prevent him from
continuing to perform these roles. In such a case, the AIG Board of Directors would need to implement its
succession plan and either have Mr. Robert S. Miller act as interim President and Chief Executive Officer or have
a permanent replacement assume Mr. Benmosche’s responsibilities.
The limitations on incentive compensation contained in the American Recovery and Reinvestment Act of 2009 and
the restrictions placed on compensation by the Special Master for TARP Executive Compensation and in our agreement
with the Department of the Treasury (the Master Transaction Agreement) may adversely affect our ability to attract
talent and retain and motivate our highest performing employees. The American Recovery and Reinvestment Act of
2009 (Recovery Act) contains provisions which, as implemented by the Department of the Treasury in its Interim
Final Rule, restrict bonus and other incentive compensation payable to the five executives named in a company’s
proxy statement and the next 20 highest paid employees of companies that received more than $500 million of
TARP funds. Pursuant to the Recovery Act, the Office of the Special Master for TARP Executive Compensation
(Special Master) issued Determination Memoranda with respect to our named executive officers and 20 highest
paid employees, and reviewed our compensation arrangements for our next 75 most highly compensated
employees and issued a Determination Memorandum on their compensation structures, which placed significant
new restrictions on their compensation as well. Historically, we have embraced a pay-for-performance philosophy.
Based on the limitations placed on incentive compensation by the Determination Memoranda issued by the
Special Master, it is unclear whether, for the foreseeable future, we will be able to create a compensation
structure that permits us to attract talent and retain and motivate our most senior and most highly compensated
employees and other high performing employees who become subject to the purview of the Special Master. The
restrictions on our ability to attract talent and retain and motivate our highest performing employees may affect
our ability to strengthen our businesses and prepare and make required filings in a timely manner with the SEC
and other federal, state and foreign regulators.
Employee error and misconduct may be difficult to detect and prevent and may result in significant losses. Losses
may result from, among other things, fraud, errors, failure to document transactions properly or to obtain proper
internal authorization or failure to comply with regulatory requirements or our internal policies. There have been
a number of highly publicized cases involving fraud or other misconduct by employees in the financial services
industry in recent years, and we run the risk that employee misconduct could occur. It is not always possible to
deter or prevent employee misconduct, and the controls that we have in place to prevent and detect this activity
may not be effective in all cases.
AIG 2010 Form 10-K 37