AIG 2012 Annual Report Download - page 334

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Liability Awards
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We have issued various share-based grants, including restricted stock units, linked to AIG Common Stock, but
providing for cash settlement to certain of our most highly compensated employees and executive officers. Share-
based cash settled awards are recorded as liabilities until the final payout is made or the award is replaced with a
stock-settled award. Compensation expense is recognized over the vesting periods, unless the award is fully vested
on the grant date in which case the entire award value is immediately expensed.
Unlike stock-settled awards, which have a fixed grant-date fair value (unless the award is subsequently modified), the
fair value of unsettled or unvested liability awards is remeasured at the end of each reporting period based on the
change in fair value of one share of AIG Common Stock. The liability and corresponding expense are adjusted
accordingly until the award is settled.
Restricted Stock Units
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Stock Salary Awards
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In 2009, we established a program of regular grants of vested stock or units that is generally referred to as ‘‘Stock
Salary.’’ Stock Salary is determined as a dollar amount through the date that salary is earned and accrued at the
same time or times as the salary would otherwise be paid in cash. Stock Salary was granted to any individual
qualifying as a senior executive officer or one of our next twenty most highly compensated employees (the Top 25).
Stock Salary for a Top 25 employee (other than our CEO) is settled in three equal installments on the first, second
and third anniversary of grant. Stock Salary was also granted to individuals qualifying as an executive officer or one
of our next 75 most highly compensated employees (Top 26-100), and is generally settled on either the first or third
anniversary of grant in accordance with the terms of an employee’s award. Except as noted below, Stock Salary
grants issued were awarded in the form of immediately vested RSUs, and the number of units awarded was based
on the value of AIG Common Stock on the grant date. During 2012, we issued 2,668,436 RSUs to eligible
employees.
In 2010, Stock Salary was awarded in the form of fully vested long term performance units (LTPU) that were
measured based on a mix of our hybrid securities and AIG Common Stock weighted 80 percent and 20 percent,
respectively. In April 2011, unsettled LTPUs were subsequently converted to RSUs based on the value of AIG
Common Stock on the conversion date. RSUs are settled in cash based on the value of AIG Common Stock on the
applicable settlement date. During 2012, 2011 and 2010 we paid $111 million, $35 million and $18 million
respectively to settle awards; for those awards that were unsettled at the end of each year, we recognized a charge
of $173 million, a reduction of $1 million and a charge of $192 million in compensation expense in the respective
years to reflect fluctuations in the price of AIG Common Stock.
TARP RSUs
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TARP RSUs awarded require the achievement of objective performance metrics as a condition to entitlement. When
vested and transferable, an award would be settled in 25 percent installments in proportion to the settlement of our
TARP obligations. Prior to December 2011, TARP RSUs granted to the Top 25 (other than our CEO) vested on the
third anniversary of grant, while TARP RSUs granted to the Top 26-100 vested on the second anniversary of grant
and are subject to transferability restrictions for an additional year after vesting. As of December 2011, all TARP
RSUs granted will vest in two 50 percent installments on the second and third anniversary of the date of grant. Our
TARP obligations were fully repaid in December 2012. Accordingly, 100 percent of outstanding TARP RSUs will vest
once the service requirements are satisfied.
Other RSUs
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Fully-vested RSUs totaling 271,131 were issued in March 2011 to certain employees in the Top 26-100 based on
2010 performance. Similarly, 301,645 fully vested RSUs were issued in March 2010 for performance in 2009. The
RSUs for both awards will be cash-settled in March 2014 and 2013 for the 2010 and 2009 grants, respectively,
based on the value of AIG Common Stock on each settlement date. Compensation expense totaling $8 million and
$9 million was recorded in December 2010 and December 2009, respectively, when the awards were initially granted
and $4 million was recorded for those awards that remained unsettled at December 31, 2012.
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AIG 2012 Form 10-K 317
ITEM 8 / NOTE 21. SHARE-BASED COMPENSATION AND OTHER PLANS