Question

How does the topic executive compensation inequality relate to the American International Group (AIG) Bonus Fiasco? Define CEO compensation inequality?

Answer 1

With the market capitalisation of these major corporations, the executive pay has risen.
When companies become more complex the market for top executives is growing and they are demanding higher pay.
In 2004-, CEOs made up just about 3 percent of individuals with the top 0.1 percent of U.S. adjusted gross income, a proportion that had shifted little from a decade ago. Take home compensation for CEOs is directly performance related.
Independent directors set out the salaries of the CEOs of most of the major corporations. Executives have more opportunities to safeguard their reputation and ensure the long- value of equity and the company's sustainable growth.

Executive compensation should be controlled because executives are seeking to maximize their profits rather than those of the shareholders they represent. While different independent directors determine the compensation of the CEOs and other executives, it is true that such individuals will influence them.
Studies that show that the return on investment from these compensation packages is very low compared with other corporate capital outlays. Obscene sums of money paid to CEOs when the world is in recession are not justified Minimum shareholder claim

AIG experienced a liquidity crisis on September 16, 2008 after its credit rating was downgraded. AIG has secured a Federal Reserve credit facility of $85 billion in return for warrants for a 79.9 percent equity interest. Since September 2008, American International Group (AIG) has floated more than $170 billion in federal assistance. Operates at around $1,500 per household in the U.S.AIG have compensated hundreds of senior workers more than $500 million in wages and bonuses.

Greed of the executives The controversy over AIG's pay reached a new level in the wake of disclosures that it rewarded workers with $450 million in compensation for 2008—when its stock fell from $57.14 per share to $1.57 per share. Worst, $165 million in payments came in the form of "retention" compensation for workers in its financial products division who sold the complex derivatives at the center of the company's fina. AIG reported a loss of $99.2 billion in 2008, with a record loss of $61.7 billion in the fourth quarter alone

The rot starts at the top Martin J. Sullivan, CEO of AIG, who received a severance package of almost $50 million when he was fired at a board meeting on June 15, 2008, when the SEC was under investigation.<br/>Joseph Cassano, who resigned as head of the financial insurance division of AIG in February 2008 after losing $11 billion but was allowed to keep $34 million in compensation and receive $1 million in bonuses.