AIG investors urged to oppose chief’s $50mn pay award

The two biggest proxy advisers have urged AIG shareholders to vote against its chief executive’s $50mn pay award, saying the special five-year scheme is excessive and not sufficiently tied to performance.

Peter Zaffino, who has led the US insurer since 2021, was hailed as a “visionary, insightful leader” when AIG announced a five-year extension to his contract in November that included the restricted stock award, which vests at the end of the period.

In a note ahead of AIG’s annual meeting next month, proxy firm Glass Lewis said the award pushed Zaffino’s annual pay “well above the median of Glass Lewis peers and self-disclosed peers, without sufficient rationale”, and recommended investors vote against it.

ISS has also called for a no vote, saying it has “significant concerns regarding the structure of the award”, highlighting the fact it has no performance criteria attached.

“There is a general expectation that large off-cycle awards should be largely conditioned on the achievement of rigorous multi-year performance criteria in recognition of the additional pay opportunities they provide,” it added.

ISS and Glass Lewis, the two biggest proxy voting firms, have significant sway over passive investors and large institutions, which often follow their recommendations on which way to vote on items at AGMs. The AIG pay vote is non-binding.

Zaffino’s entire five-year award was recognised in his 2022 pay, taking his total compensation for the year to $75.3mn, up from $21.9mn the previous year.

ISS raised separate concerns over AIG’s annual and long-term incentive plans for Zaffino, questioning the “rigour” of the metric for total shareholder return.

Zaffino joined AIG in 2017 as global chief operating officer and was appointed president in 2019 before taking the additional role of chief executive two years later.

AIG has undergone significant change during his tenure, with moves including last year’s initial public offering of its life insurance and retirement business, Corebridge.

In the insurer’s proxy statement, the document a US company must provide to investors ahead of AGM votes, it said a significant theme that had emerged from discussions with shareholders was “the importance of [Zaffino’s] retention” and the “stability he provides”.

AIG has had a string of chief executives and a stop-start restructuring since its bailout in the 2008 financial crisis.

John Rice, lead independent director on AIG’s board, said the analyses provided by ISS and Glass Lewis were “deficient”, and did not recognise “shareholder-friendly provisions” in Zaffino’s pay agreement.

“The board believes that Peter’s mix of compensation appropriately balances pay-for-performance objectives with a view toward sustainable and profitable growth,” Rice said.

“By securing his leadership for at least the next five years, Peter’s employment agreement will incentivise him to continue to drive long-term value creation for AIG and our shareholders.”