AIG Ex-CEO Severance Seen As High As $68M

June 18, 2008

American International Group Inc’s former chief executive, Martin Sullivan, who stepped down on Sunday amid large subprime losses, could receive up to $68 million in severance pay and benefits, according to an estimate compiled by an outside research firm.

Corporate governance firm The Corporate Library on Tuesday said Sullivan — who was replaced by Chairman Robert Willumstad as CEO on Sunday — could receive up to $2.5 million in salary, $26.6 million in bonus payments, $14 million from a defined contribution plan, $21.9 million worth of stock awards, $3.3 million in pension benefits and $32,316 in medical and life insurance coverage, according to a report by research analyst Alexandra Higgins.

The figure is far higher than what has been disclosed by the company in regulatory filings, and higher than the actual severance package that is likely to be negotiated. Although the final figure has not been set, Sullivan is more likely to receive between $35 million and $50 million in pay and benefits, according to a source familiar with the matter.

The Corporate Library compiles its estimates based on severance agreements, and the latest pay and benefits information provided by the company.

AIG, in a regulatory filing earlier this year, said Sullivan was due a termination pay and benefits package of $35 million, as long as he left for good reasons, or was asked to step down “without cause.”

The figure includes salary of $5 million, $30 million in severance pay, and $32,316 in medical and life insurance benefits but does not include pensions, or stock awards.

Sullivan is the latest in a line of executives who have resigned from their firms after large losses from subprime investments. AIG has, over the past two quarters, written down more than $20 billion in assets linked to subprime mortgages.

Other executives to stand down amid mounting mortgage losses include Charles Prince, who had been head of Citigroup , and Stanley O’Neal, former CEO at Merrill Lynch & Co.

(Reporting by Lilla Zuill, editing by Phil Berlowitz)

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