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Isn't AIG's stock worthless? Then why is it $28 a share?
One of the strangest things to come out of Steve Brill's piece on Kenneth Feinberg's role as compensation czar is the bit about American International Group stock. Feinberg made stock-based compensation a major plank in his guidelines for the TARP companies whose compensation practices he is in charge of regulating. Paying people in stock rather than cash is supposed to encourage executives to stick around the company and put shareholder interests above personal ones.
So it seemed perverse that AIG argued that stock-based compensation wouldn't work in its case, because AIG stock was essentially worthless. Brill writes that AIG Vice Chairman Anastasia Kelly presented the argument to Feinberg:
"Second, and more important, those top executives at AIG who hadn't received the retention bonuses refused to accept the salarized stock as part of their pay packages. They wanted all cash. AIG's Kelly told Feinberg that their position was that AIG's stock -- which was trading in the late summer and fall at around $40 -- was, in a word that Feinberg says he remembers vividly, 'worthless.' Kelly explained AIG's position this way: 'We wanted compensation for people at AIG that they would see value in.' "
Brill goes on to explain that the New York Fed concurred: AIG's stock was worthless.