AIG CEO Benmosche to Stay, But Keeps Battling Over Executive Pay

(MoneyWatch)  It's hard to know whether American International Group CEO Robert Benmosche's threat to quit at a company board meeting last week was sincere or just good theater, particularly since he now says he plans to stay.

But given the fact that Battling Bob was MetLife CEO for eight of its most profitable years before taking his turn at AIG, it's unlikely that it was just anger. The more realistic possibility is that Benmosche was playing to his internal audience, the 100,000 AIG staffers who are, in the words of today's company memo, "frustrated."

As well they should be. If ever a group of employees have been beaten up, most without cause, it's those at AIG. The failure that brought the company down was in the Financial Products unit, which made a wrong-way bet on mortgage-backed securities during the boom years of 2002-2005. The 95 percent of the company that sells insurance, does asset management, and leases aircraft was completely innocent.

Now to be told by President Obama's pay czar Ken Feinberg that the 100 top executives can't earn more than $500,000 represents another slap in the face to these workers. If your boss is only allowed to make that much, then those underneath have to earn even less.

Benmosche isn't governed by the Feinberg fiat; he'll earn $10.5 million this year. But threatening to quit and then letting the news leak shows that he feels his employees' pain. And then making an even more public statement about staying and rallying the troops, well, that's being a commander-in-chief of the highest order, whatever the outside world thinks.

Benmosche probably knew that to quit or not to quit wasn't going to change Feinberg's mind about pay limits. But it might give him a bit more leverage. Direct pay is one thing; stock options and performance bonuses are another. And in that area there could be some wiggle room. AIG now has two quarters of positive earnings, even though the numbers are a bit dubious. Moody's Investors Service is now saying the insurer could someday pay off taxpayers.

And if that happens, AIG employees and their bosses deserve more than the $25,000 perks Feinberg is suggesting. And Benmosche could be hailed as a hero ... if he hasn't already retreated.