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AIG to revamp pay; Congress wants taxes

AIG has announced it is restructuring its incentive pay program.

AIG logo The insurance giant, which we taxpayers technically control thanks to our $90 billion investment, says it will use a a "forced distribution" system.

Thousands of AIG employees now will be ranked on a scale of 1 to 4 based on their performance relative to their peers. Then their annual variable compensation, which may include bonuses, will be determined by their rank.

Gone are the old retention awards that are based on just sticking around. Welcome to the brave new world of pay for performance.

Under the plan, only 10 percent of the ranked employees will get the top "1" ranking. By making that top tier, they'll get much more year-end incentive pay.

Not surprisingly, the change to a payroll meritocracy isn't sitting well with some employees. But AIG hopes it will satisfy U.S. pay czar Kenneth Feinbeirg, who's been a critic of the company's previous retention bonuses to some executives.

Congress looks to tax corporate payouts: The company also probably hopes that the move might stall Congressional action on corporate pay.

Last week, Sen. Barbara Boxer (D-Calif.) and Jim Webb (D-Va.) introduced legislation that would impose a tax on large bonuses paid by Wall Street banks and other firms that received more than $5 billion from the Troubled Asset Relief Program (TARP) in 2009.

The Taxpayer Fairness Act would impose a 50 percent excise tax on the bonuses of employees at TARP firms that exceeded $400,000 in 2009. Why $400,000? That just happens to be the U.S. president's salary.

Money from the tax, say Boxer and Webb, would be used to reduce the deficit or to help the nation recover from the recession.

Just after Congress reconvened last month, Rep. Peter Welch (D-Vt.) introduced a similar bill, the Wall Street Bonus Tax Act. It's co-sponsored by 23 of his House colleagues.

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