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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
AMERICAN INTERNATIONAL GROUP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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AMERICAN INTERNATIONAL GROUP, INC.
70 Pine Street, New York, N.Y. 10270
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1998
April 6, 1998
To the Shareholders of
AMERICAN INTERNATIONAL GROUP, INC.:
The Annual Meeting of Shareholders of AMERICAN INTERNATIONAL GROUP, INC.
("AIG") will be held at the offices of AIG at 72 Wall Street, Eighth Floor, New
York, New York, on Wednesday, May 20, 1998, at 11:00 o'clock A.M., for the
following purposes:
1. To elect 17 directors of AIG to hold office until the next annual
election and until their successors are elected and qualified;
2. To act upon a proposal to amend the Restated Certificate of
Incorporation, as amended, to increase the authorized shares of Common
Stock from 1,000,000,000 to 2,000,000,000 shares;
3. To act upon a proposal to select Coopers & Lybrand L.L.P. as independent
accountants for 1998;
4. To act upon a shareholder proposal requesting AIG to change the
composition of the Nominating Committee;
5. To act upon a shareholder proposal requesting AIG to provide a report on
certain Board matters; and
6. To transact any other business that may properly come before the
meeting.
Shareholders of record at the close of business on March 24, 1998 will be
entitled to vote at the meeting. During the ten days prior to the meeting, a
list of the shareholders will be available for inspection at the offices of AIG
at 70 Pine Street, New York, New York.
By Order of the Board of
Directors
KATHLEEN E. SHANNON
Secretary
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If you cannot be present at the meeting, please sign the enclosed Proxy and
return it at once in the accompanying postage prepaid envelope.
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AMERICAN INTERNATIONAL GROUP, INC.
70 Pine Street, New York, N.Y. 10270
PROXY STATEMENT
April 6, 1998
The enclosed proxy is solicited on behalf of the Board of Directors for use
at the Annual Meeting of Shareholders of American International Group, Inc., a
Delaware corporation ("AIG"), to be held on May 20, 1998, or at any adjournment
thereof. It may be revoked at any time prior to its use. Proxies will be voted
as specified and, unless otherwise specified, will be voted for the election of
directors, for the proposal to amend the Restated Certificate of Incorporation,
for the selection of Coopers & Lybrand L.L.P. as independent accountants for
1998, against the shareholder proposal requesting AIG to change the composition
of the Nominating Committee, and against the shareholder proposal requesting AIG
to provide a report on certain Board matters. These proxy materials are being
mailed to shareholders of AIG commencing on or about April 6, 1998.
Only shareholders of record at the close of business on March 24, 1998 will
be entitled to vote at the meeting. On that date, 699,605,081 shares (exclusive
of shares held by AIG and certain subsidiaries) of common stock, par value $2.50
per share ("AIG Common Stock"), were outstanding, each such share of stock
having one vote.
Proxies marked as abstaining, and any proxies returned by brokers as
"non-votes" on behalf of shares held in street name because beneficial owners'
discretion has been withheld as to one or more matters on the agenda for the
Annual Meeting, will be treated as present for purposes of determining a quorum
for the Annual Meeting. With respect to the election of directors, any shares
not voted as a result of an abstention or a broker non-vote will have no impact
on the vote. With respect to the amendment of the Restated Certificate of
Incorporation, an abstention or a broker non-vote will effectively be treated as
a vote against the proposal. With respect to the selection of Coopers & Lybrand
L.L.P. as independent accountants and the two shareholder proposals, a broker
non-vote will have no impact on the vote and an abstention will be effectively
treated as a vote against the proposal.
I. ELECTION OF DIRECTORS
Seventeen directors are to be elected at the meeting to hold office until
the next annual election and until their successors are elected and qualified.
It is the intention of the persons named in the accompanying proxy to vote for
the election of the nominees listed below, all of whom are currently members of
your Board of Directors. It is not expected that any of the nominees will become
unavailable for election as a director, but if any should prior to the meeting,
proxies will be voted for such persons as your Board of Directors shall
recommend. Directors will be elected by a plurality of the votes cast. The
nominees and certain information supplied by them to AIG are as follows:
[PHOTO] M. BERNARD AIDINOFF SENIOR COUNSEL, SULLIVAN & CROMWELL
(Attorneys)
Director since 1984 Age 69
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[PHOTO] LLOYD M. BENTSEN PARTNER, VERNER, LIIPFERT, BERNHARD,
MCPHERSON & HAND (Attorneys);
Director since 1995 FORMER UNITED STATES SECRETARY OF THE
TREASURY AND FORMER MEMBER,
UNITED STATES SENATE
Age 77
[PHOTO] PEI-YUAN CHIA RETIRED VICE CHAIRMAN, CITICORP
AND CITIBANK, N.A.
Director since 1996
Age 59
Director, Baxter International, Inc.
Case Corporation
[PHOTO] MARSHALL A. COHEN COUNSEL, CASSELS BROCK & BLACKWELL (Barristers and
Solicitors); FORMER PRESIDENT AND CHIEF EXECUTIVE
Director since 1992 OFFICER, THE MOLSON COMPANIES LIMITED
(Brewing, Chemical Specialties, Retail Merchandising and
Sports and Entertainment)
Age 62
Director, Barrick Gold Corporation
Clark USA, Inc.
Lafarge Corporation
[PHOTO] BARBER B. CONABLE, JR. RETIRED; FORMER PRESIDENT, WORLD BANK, AND
FORMER MEMBER, UNITED STATES HOUSE OF REPRESENTATIVES
Director since 1991
Age 75
[PHOTO] MARTIN S. FELDSTEIN PROFESSOR OF ECONOMICS, HARVARD UNIVERSITY;
PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL BUREAU
Director since 1987 OF ECONOMIC RESEARCH
(Nonprofit Economic Research Center)
Age 58
Director, J. P. Morgan & Co. Incorporated
TRW, Inc.
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[PHOTO] LESLIE L. GONDA CHAIRMAN, INTERNATIONAL LEASE FINANCE
CORPORATION ("ILFC")
Director since 1990 (a wholly-owned subsidiary of AIG)
Age 78
Also serves as a director of ILFC
[PHOTO] EVAN G. GREENBERG PRESIDENT AND CHIEF OPERATING OFFICER, AIG
Director since 1996 Age 43
Also serves as a director of C.V. Starr & Co., Inc.
("Starr") and Starr International Company, Inc.
("SICO"), private holding companies (see "Ownership of
Certain Securities")
[PHOTO] MAURICE R. GREENBERG CHAIRMAN AND CHIEF EXECUTIVE OFFICER, AIG
Director since 1967 Age 72
Director, Transatlantic Holdings, Inc.
("Transatlantic"), which is owned
49 percent by AIG
Also serves as Chairman of Transatlantic, a director,
President and Chief Executive Officer of Starr, and a
director of SICO and ILFC
[PHOTO] CARLA A. HILLS CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
HILLS & COMPANY; FORMER UNITED STATES
Director since 1993 TRADE REPRESENTATIVE
(Hills & Company provides international
investment, trade and risk advisory services)
Age 64
Director, Chevron Corporation
Lucent Technologies Inc.
Time Warner Inc.
[PHOTO] FRANK J. HOENEMEYER FINANCIAL CONSULTANT;
RETIRED VICE CHAIRMAN,
Director since 1985 PRUDENTIAL INSURANCE COMPANY OF AMERICA
Age 78
Director, Carey Fiduciary Advisors, Inc.
Cincinnati, Inc.
Wellsford Real Properties, Inc.
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[PHOTO] EDWARD E. MATTHEWS VICE CHAIRMAN -- INVESTMENTS AND FINANCIAL SERVICES, AIG
Director since 1973 Age 66
Director, Transatlantic
Also serves as a director of Starr, SICO and ILFC
[PHOTO] DEAN P. PHYPERS RETIRED SENIOR VICE PRESIDENT,
INTERNATIONAL BUSINESS MACHINES CORPORATION
Director since 1979
Age 69
Director, Bethlehem Steel Corporation
Cambrex Corporation
Church & Dwight Co. Inc.
[PHOTO] HOWARD I. SMITH EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND COMPTROLLER, AIG
Director since 1997
Age 53
Director, The Kroll-O'Gara Company
Transatlantic
Twentieth Century Industries
Also serves as a director of Starr, SICO and ILFC
[PHOTO] THOMAS R. TIZZIO SENIOR VICE CHAIRMAN -- GENERAL
INSURANCE, AIG
Director since 1986
Age 60
Director, Transatlantic
Also serves as a director of Starr and SICO
[PHOTO] EDMUND S.W. TSE VICE CHAIRMAN -- LIFE INSURANCE, AIG
Director since 1996 Age 60
Also serves as a director of Starr and SICO
[PHOTO] FRANK G. WISNER VICE CHAIRMAN -- EXTERNAL AFFAIRS, AIG
Elected September 17, 1997 Age 59
Director, Enron Oil & Gas Company
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The principal occupation or affiliation of the nominees is shown in bold
face type. Each of the directors who is also an executive officer of AIG except
for Mr. Wisner has, for more than five years, occupied an executive position
with AIG or companies that are now its subsidiaries, and, except as hereinafter
noted, each other director has occupied an executive position with his company
or organization listed above for at least five years. Mr. Wisner served as a
career foreign service officer with the United States Department of State from
1961 through July 1997, with his last position being Ambassador to India. Mr.
Bentsen served as United States Secretary of the Treasury from January 20, 1993
until December 22, 1994, and as United States Senator from Texas from 1971 until
1993. Mr. Chia retired from Citicorp on September 1, 1996. Mr. Cohen became
counsel to Cassels Brock & Blackwell on September 12, 1996, having previously
served as President and Chief Executive Officer of The Molson Companies Limited.
Mrs. Hills served as United States Trade Representative from 1989 until 1993.
E.G. Greenberg is the son of M.R. Greenberg.
There were four regularly scheduled meetings and one special meeting of the
Board during 1997. All of the directors attended at least 75% of the aggregate
of all meetings of the directors and of the committees of the Board on which
they served.
The Audit Committee, which held four meetings during 1997, gives general
advice to the Board and the officers in matters relating to the audits of the
records of account of AIG and its subsidiaries. The Committee reviews the
performance and scope of audit and non-audit services provided by the
independent accountants during the fiscal year and recommends to the Board the
nomination of the independent public accountants as auditors for the ensuing
fiscal year. In addition, the Committee reviews reports issued by the internal
auditing department and the independent accountants. Messrs. Aidinoff, Conable,
Hoenemeyer and Phypers and Mrs. Hills are the current members of the Audit
Committee.
The Stock Option and Compensation Committee, which held eight meetings
during 1997, administers the various AIG stock option plans, establishes the
compensation of the Chief Executive Officer and sets policy for compensation for
senior management. Current members of the Committee are Messrs. Cohen, Conable
and Hoenemeyer.
The principal function of the Executive Committee, which held six meetings
in 1997, is to act for the Board between Board meetings. Although the Executive
Committee formally serves as a nominating committee, in practice the Board
serves as a committee of the whole in determining nominees for membership. Any
member of the Board can present names for consideration, and no action is taken
on any candidate until that candidate is discussed with each non-employee member
of the Board. All proposed nominees for membership on the Board of Directors
submitted in writing by shareholders to the Secretary of AIG will be brought to
the attention of the Executive Committee. Messrs. Aidinoff, E.G. Greenberg, M.R.
Greenberg, Hoenemeyer, Matthews, and Tizzio are the current members of the
Executive Committee.
The Finance Committee, which oversees the financial affairs and investment
activities of AIG and its subsidiaries, held twelve meetings during 1997.
Messrs. Aidinoff, Bentsen, Chia, Conable, Feldstein, M.R. Greenberg, Hoenemeyer,
Matthews, Phypers and Smith currently serve as members of the Finance Committee.
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OWNERSHIP OF CERTAIN SECURITIES
The following table summarizes the ownership of equity securities of AIG
and affiliated companies which may be considered by the Securities and Exchange
Commission to be its parents, by the directors, all of which are nominees and
which include all of the executive officers named in the Summary Compensation
Table (as set forth under the caption "Compensation of Directors and Executive
Officers") and by the directors and executive officers as a group.
EQUITY SECURITIES OF AIG AND ITS PARENTS
OWNED BENEFICIALLY AS OF JANUARY 31, 1998(1)
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STARR SICO
AIG COMMON STOCK VOTING STOCK
COMMON STOCK --------------------------- ---------------------------
------------------------------- AMOUNT AND AMOUNT AND
AMOUNT AND NATURE OF PERCENT NATURE OF PERCENT NATURE OF PERCENT
BENEFICIAL OF BENEFICIAL OF BENEFICIAL OF
DIRECTOR OR EXECUTIVE OFFICER OWNERSHIP(2)(3)(4)(5) CLASS OWNERSHIP(6) CLASS OWNERSHIP CLASS
- ----------------------------- --------------------- ------- --------------- --------- --------------- ---------
M. Bernard Aidinoff.......... 31,234 (7) 0 -- 0 --
Lloyd M. Bentsen............. 28,441 (7) 0 -- 0 --
Pei-yuan Chia................ 12,312 (7) 0 -- 0 --
Marshall A. Cohen............ 22,463 (7) 0 -- 0 --
Barber B. Conable, Jr. ...... 27,188 (7) 0 -- 0 --
Martin S. Feldstein.......... 37,940 (7) 0 -- 0 --
Leslie L. Gonda.............. 7,393,854 1.06 0 -- 0 --
E.G. Greenberg............... 91,227 .01 1,750 8.70 10 8.33
M. R. Greenberg.............. 16,205,932 2.32 5,000 24.84 10 8.33
Carla A. Hills............... 24,054 (7) 0 -- 0 --
Frank J. Hoenemeyer.......... 38,229 (7) 0 -- 0 --
Edward E. Matthews........... 609,642 .09 2,250 11.18 10 8.33
Dean P. Phypers.............. 33,084 (7) 0 -- 0 --
Howard I. Smith.............. 99,671 .01 1,375 6.83 10 8.33
Thomas R. Tizzio............. 339,984 .05 1,750 8.70 10 8.33
Edmund S.W. Tse.............. 181,089 .03 1,500 7.45 10 8.33
Frank G. Wisner.............. 0 -- 0 -- 0 --
All Directors and Executive
Officers of AIG as a Group
(30 individuals)........... 41,406,053 5.91 16,000 79.50 90 75.00
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(1) Amounts of equity securities of Starr and SICO shown represent shares as to
which the individual has sole voting and investment power. With respect to
shares of AIG Common Stock, totals include shares as to which the
individual shares voting and investment power as follows:
Feldstein -- 8,437 shares with his wife, E.G. Greenberg -- 22,470 shares
with co-trustees, M.R. Greenberg -- 15,261,417 shares with his wife and
40,699 shares with co-trustees, Tizzio -- 135,046 shares with his wife, and
all directors and executive officers of AIG as a group -- 16,045,647
shares.
(2) Amount of equity securities shown includes shares of AIG Common Stock
subject to options which may be exercised within 60 days as follows:
Aidinoff -- 18,750 shares, Bentsen -- 24,375 shares, Chia -- 7,500 shares,
Cohen -- 18,750 shares, Conable -- 18,750 shares, Feldstein -- 18,750
shares, E.G. Greenberg -- 26,812 shares, M.R. Greenberg -- 542,813 shares,
Hills -- 18,750 shares, Hoenemeyer -- 18,750 shares, Matthews -- 200,718
shares, Phypers -- 18,750 shares, Smith -- 78,515 shares, Tizzio -- 204,938
shares, Tse -- 83,578 shares, and all directors and executive officers of
AIG as a group -- 1,536,548 shares.
(3) Amount of shares shown for Mr. M.R. Greenberg does not include 7,213,222
shares held as trustee for the Starr Trust, as to which he disclaims
beneficial ownership. Inclusion of these shares would increase the total
ownership shown for Mr. M.R. Greenberg by 1.03 percent.
(4) Amount of equity securities shown also excludes the following securities
owned by members of the named individual's immediate family as to which
securities such individual has disclaimed beneficial ownership:
Aidinoff -- 813 shares, Matthews -- 7,500 shares, Tizzio -- 19,953 shares,
and all directors and executive officers of AIG as a group -- 28,707
shares.
(5) Amount of shares shown for Mr. M.R. Greenberg also excludes 2,393,340 shares
owned directly by Starr (representing 24.84 percent of the shares owned
directly by Starr) as to which Mr. M.R. Greenberg disclaims beneficial
ownership.
(6) As of January 31, 1998, Starr also had outstanding 5,250 shares of Common
Stock Class B, a non-voting stock. None of the nominees holds such shares.
Shares of Starr's Series A through Series P Preferred Stock and its 5%
Subordinated Preferred Stock were held by the nominees as follows on
January 31, 1998: Preferred Stock,
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(Footnotes continued from preceding page)
Series A--M.R. Greenberg (5,000) and Matthews (1,500); Preferred Stock,
Series B--M.R. Greenberg (5,000) and Matthews (1,750); Preferred Stock,
Series C--M.R. Greenberg (5,000), Matthews (1,750) and Tizzio (125);
Preferred Stock, Series D--M.R. Greenberg (5,000), Matthews (1,750) and
Tizzio (375); Preferred Stock, Series E--M.R. Greenberg (5,000), Matthews
(2,000), Smith (125), Tizzio (625) and Tse (125); Preferred Stock, Series
F--M.R. Greenberg (5,000), Matthews (2,000), Smith (250), Tizzio (1,000)
and Tse (125); Preferred Stock, Series G--M.R. Greenberg (5,000), Matthews
(2,250), Smith (375), Tizzio (1,000) and Tse (250); Preferred Stock, Series
H--E.G. Greenberg (125), M.R. Greenberg (5,000), Matthews (2,250), Smith
(500), Tizzio (1,000) and Tse (250); Preferred Stock, Series I--E.G.
Greenberg (125), M.R. Greenberg (5,000), Matthews (2,250), Smith (500),
Tizzio (1,000) and Tse (250); Preferred Stock, Series J--E.G. Greenberg
(250), M.R. Greenberg (5,000), Matthews (2,250), Smith (625), Tizzio
(1,000) and Tse (500); Preferred Stock, Series K--E.G. Greenberg (375),
M.R. Greenberg (5,000), Matthews (2,250), Smith (625), Tizzio (1,250) and
Tse (750); Preferred Stock, Series L--E.G. Greenberg (375), M.R. Greenberg
(5,000), Matthews (2,250), Smith (625), Tizzio (1,250) and Tse (750);
Preferred Stock, Series M--E.G. Greenberg (500), M.R. Greenberg (5,000),
Matthews (2,250), Smith (750), Tizzio (1,500) and Tse (1,000); Preferred
Stock, Series N -- E.G. Greenberg (750), M.R. Greenberg (5,000), Matthews
(2,250), Smith (1,000), Tizzio (1,500) and Tse (1,125); Preferred Stock,
Series O -- E.G. Greenberg (750), M.R. Greenberg (5,000), Matthews (2,250),
Smith (1,000), Tizzio (1,500) and Tse (1,125); Preferred Stock, Series
P--E.G. Greenberg (1,000), M.R. Greenberg (5,000), Matthews (2,250), Smith
(1,000), Tizzio (1,500) and Tse (1,125) and 5% Subordinated Preferred
Stock--M.R. Greenberg (100). The total outstanding shares were: Preferred
Stock, Series A (15,240), Preferred Stock, Series B (15,055), Preferred
Stock, Series C (15,555), Preferred Stock, Series D (16,430), Preferred
Stock, Series E (17,930), Preferred Stock, Series F (19,555), Preferred
Stock, Series G (19,500), Preferred Stock, Series H (19,000), Preferred
Stock, Series I (19,375), Preferred Stock, Series J (20,375), Preferred
Stock, Series K (21,250), Preferred Stock, Series L (21,250), Preferred
Stock, Series M (20,625), Preferred Stock, Series N (21,250), Preferred
Stock, Series O (21,250), Preferred Stock, Series P (22,250) and 5%
Subordinated Preferred Stock (340).
(7) Less than .01%.
The only person who, to the knowledge of AIG, owns in excess of five
percent of the AIG Common Stock is SICO, P.O. Box 152, Hamilton, Bermuda. At
January 31, 1998, SICO held 113,363,264 shares, or 16.21 percent of the
outstanding AIG Common Stock. The Starr Foundation and Starr (both having
executive offices at 70 Pine Street, New York, New York) held 24,582,700 shares
and 16,848,247 shares (including 7,213,222 shares held by the C. V. Starr & Co.
Inc. Trust), or 3.51 percent and 2.41 percent, respectively, of the outstanding
AIG Common Stock on that date.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, executive officers and 10 percent holders of AIG Common Stock to file
reports concerning their ownership of AIG equity securities. Based solely on the
review of the Forms 3, 4 and 5 furnished to AIG and certain representations made
to AIG, AIG believes that the only filing deficiencies under Section 16(a) by
its directors and executive officers during 1997 were one late report filed by
each of Messrs. Dooley, English, Freudmann, Petralito, Sandler and Sullivan and
Ms. Shannon, executive officers of AIG, which reflected early payouts pursuant
to the SICO Plan (as hereinafter defined) of 2,531 shares, 3,332 shares, 3,183
shares, 1,276 shares, 3,638 shares, 2,014 shares and 2,166 shares, respectively.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Directors who are employees of AIG or its subsidiaries do not receive fees
for service on the Board or the committees. Each other director of AIG receives
director's fees of $15,000 per year, plus $1,500 for each Board meeting
attended. An annual fee of $3,500 is paid to each member of each committee of
the Board. Members of each committee also receive $1,500 for each committee
meeting attended. In addition, directors who are not employees of AIG or its
subsidiaries each purchase 675 shares of AIG Common Stock per year, for which
they are reimbursed by AIG. Certain directors who are not employees of AIG also
serve as directors of various subsidiaries of AIG and receive fees for their
service in that capacity.
Mr. Aidinoff is Senior Counsel to the law firm of Sullivan & Cromwell, and
Mr. Bentsen is a partner in the law firm of Verner, Liipfert, Bernhard,
McPherson & Hand, each of which in 1997 provided legal services to AIG and its
subsidiaries, receiving normal fees for services rendered. In connection with
services provided to the AIG-GE Capital Latin American Infrastructure Fund,
L.P., Mr. Bentsen may receive future consideration from AIG or its subsidiaries.
Mr. Chia has received $600,000 in payments from AIG during 1997 for services
provided pursuant to a consulting arrangement. Mrs. Hills has entered into a
consulting arrangement with AIG through Hills & Company, whereby she provides
services to AIG.
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The following Summary Compensation Table sets forth the compensation
accrued for services in all capacities to AIG and its subsidiaries by M.R.
Greenberg, the Chairman and Chief Executive Officer of AIG, and the other four
most highly compensated executive officers of AIG at December 31, 1997.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ----------------------------------
NAME AND ----------------------- AWARDS SICO ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS STOCK OPTIONS(#) LTIP PAYOUTS(1) COMPENSATION(2)
------------------ ---- ------ ----- ---------------- --------------- ---------------
M.R. Greenberg...................... 1997 $1,000,000 $3,650,000(3) 75,000 -- $ 6,923
Chairman and Chief 1996 1,000,000 3,150,000(4) 75,000(5) $10,825,000 9,500
Executive Officer 1995 1,000,000 3,150,000(4) 75,000(5) -- 6,923
T.R. Tizzio......................... 1997 556,623 530,000 20,000 -- 7,680
President through May 21, 1996 506,624 470,000 30,000(5) 3,788,750 9,500
1997; Senior Vice 1995 456,624 410,000 22,500(5) -- 7,835
Chairman -- General
Insurance thereafter
E.E. Matthews....................... 1997 566,923 410,000 20,000 -- 7,957
Vice Chairman -- Investments 1996 516,924 470,000 30,000(5) 3,788,750 9,500
and Financial Services 1995 466,924 470,000 22,500(5) -- 7,844
E.S.W. Tse.......................... 1997 352,942 348,824 20,000 -- 44,118
Executive Vice President -- 1996 302,942 292,500 22,500(5) 1,732,000 2,901,648
Life Insurance through 1995 285,000 277,500 15,000(5) -- 35,625
May 21, 1997; Vice
Chairman -- Life Insurance
thereafter
E.G. Greenberg...................... 1997 328,846 310,000 25,000 -- 9,500
Executive Vice President -- 1996 256,731 194,000 22,500(5) 1,299,060 --
Foreign General Insurance 1995 206,923 194,000 7,500(5) -- --
through May 21, 1997; President
and Chief Operating Officer
thereafter
- ---------------
(1) The LTIP payouts will be made by SICO pursuant to its Deferred Compensation
Profit Participation Plan (the "SICO Plan") and will not be paid by or
charged to AIG. Amounts shown in 1996 represent the value, based on the
closing sale price of AIG Common Stock on December 31, 1996 ($72.17), of
shares of AIG Common Stock allocated with respect to the January 1, 1995 to
December 31, 1996 period but not distributed under the SICO Plan. The SICO
Plan came into being in 1975 when the voting shareholders and Board of
Directors of SICO, a private holding company whose principal asset consists
of AIG Common Stock, decided that a portion of the capital value of SICO
should be used to provide an incentive plan for the current and succeeding
managements of all American International companies, including AIG.
Participation in the SICO Plan by any person, and the amount of such
participation, is at the sole discretion of SICO's Board of Directors, and
none of the costs of the various benefits provided under such plan is
charged to or absorbed by AIG. The SICO Plan provides that shares may be set
aside by SICO for the benefit of the participant and distributed upon
retirement. The SICO Board of Directors may permit an early pay-out of units
under certain circumstances, but none of the individuals named in the
Summary Compensation Table is eligible for such early pay-out with respect
to units awarded to them. Prior to pay-out, the participant is not entitled
to vote, dispose of or receive dividends with respect to such shares, and
shares are subject to forfeiture under certain conditions, including but not
limited to the participant's voluntary termination of employment with AIG
prior to normal retirement age. In addition, SICO's Board of Directors may
elect to pay a participant cash in lieu of shares of AIG Common Stock. In
March, 1997, a determination was made as to the number of AIG shares
allocable to the accounts of the participants in the SICO Plan with respect
to units awarded in December, 1994 with respect to the January 1, 1995 to
December 31, 1996 period. The values shown for the year 1996 represent the
number of AIG shares allocated to named executive officers as follows: M.R.
Greenberg -- 150,000 shares; Tizzio -- 52,500 shares; Matthews -- 52,500
shares; Tse -- 24,000 shares; and E.G. Greenberg -- 18,000 shares. All 1996
share amounts and sale prices are adjusted to reflect the stock split
effected as a 50 percent stock dividend in July, 1997.
(2) Amounts shown for Messrs. M.R. Greenberg, Tizzio, Matthews and E.G.
Greenberg represent matching contributions under AIG's 401(k) Plan. Amounts
shown for Mr. Tse reflect contributions by AIG to the American International
Companies (Hong Kong) Staff Provident Plan and, in 1996, includes
approximately $2.86 million, which represents the difference between the
purchase price and the fair market value of a residential property sold by
American International Assurance Company, Limited, a wholly-owned subsidiary
of AIG ("AIA"), to Mr. Tse in December 1996. AIA is entitled to repurchase
the property at the purchase price plus interest if Mr. Tse leaves AIA's
employment prior to retirement at normal retirement age other than upon
death, disability, or early retirement with the consent of AIA.
(3) Paid pursuant to the Chief Executive Officer Compensation Plan approved by
the Shareholders in May, 1997.
(4) Paid pursuant to the Chief Executive Officer Performance Based Compensation
Plan approved by the shareholders in May, 1994.
(5) Adjusted to reflect stock split effected as a 50 percent stock dividend in
July, 1997.
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The following table summarizes certain information with respect to grants
of options to purchase AIG Common Stock which were granted during 1997 to the
five individuals named in the Summary Compensation Table, to all executive
officers of AIG as a group, and to all employees.
OPTION GRANTS IN 1997
POTENTIAL REALIZABLE VALUE* AT
PERCENTAGE OF ASSUMED ANNUAL RATES OF
TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM
DATE GRANTED EMPLOYEES PRICE EXPIRATION -------------------------------
NAME OF GRANT (1) DURING 1997 PER SHARE DATE 5 PERCENT(2) 10 PERCENT(3)
---- -------- ------- ------------- --------- ---------- ------------ -------------
M.R. Greenberg....... 12/8/97 75,000 9.93 $106.50 12/8/07 $ 5,023,296 $ 12,730,018
T.R. Tizzio.......... 12/8/97 20,000 2.65 106.50 12/8/07 1,339,546 3,394,671
E.E. Matthews........ 12/8/97 20,000 2.65 106.50 12/8/07 1,339,546 3,394,671
E.S.W. Tse........... 12/8/97 20,000 2.65 106.50 12/8/07 1,339,546 3,394,671
E.G. Greenberg....... 12/8/97 25,000 3.31 106.50 12/8/07 1,674,432 4,243,339
All Executive
Officers of AIG as
a Group (21
individuals)....... Various 203,000 26.87 106.32(4) Various 13,572,804 34,396,150
All Employees........ Various 755,350 N/A 105.79(4) Various 50,253,436 127,352,010
All Shareholders
Stock
Appreciation(5).... N/A N/A N/A N/A N/A 4$7.8 billion $121.2 billion
All Unaffiliated
Shareholders Stock
Appreciation(5).... N/A N/A N/A N/A N/A 3$4.3 billion $86.9 billion
- ---------------
* Options would have no realizable value if there were no appreciation or if
there were depreciation from the price at which the options were granted.
(1) All options were granted pursuant to the 1991 Employee Stock Option Plan at
an exercise price equal to the fair market value of such stock at the date
of grant. The option grants provide that 25 percent of the options granted
on any date become exercisable on each anniversary date in each of the
successive four years.
(2) Appreciated price would be $173.48 per share for the individuals named,
$173.18 per share for all executive officers and a weighted average of
$172.32 per share for all employees.
(3) Appreciated price would be $276.23 per share for the individuals named,
$275.77 per share for all executive officers and a weighted average of
$274.39 per share for all employees.
(4) Weighted average exercise price per share.
(5) Calculated using the 699,518,281 shares of AIG Common Stock outstanding at
December 31, 1997.
The following table summarizes certain information with respect to the
exercise of options to purchase AIG Common Stock during 1997 by the five
individuals named in the Summary Compensation Table and the unexercised options
to purchase AIG Common Stock held by such individuals at December 31, 1997.
AGGREGATED OPTION EXERCISES DURING THE YEAR ENDED DECEMBER 31, 1997
AND DECEMBER 31, 1997 OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1997 AT DECEMBER 31, 1997(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
M.R. Greenberg......... 84,375 $7,361,643 542,813/182,812 $42,522,926/$4,845,672
T.R. Tizzio............ 16,875 1,509,243 204,938/ 62,187 15,777,394/ 1,925,827
E.E. Matthews.......... 21,093 1,302,539 200,718/ 59,375 15,630,853/ 1,741,094
E.S.W. Tse............. 1,687 163,954 83,578/ 48,312 6,020,967/ 1,254,890
E.G. Greenberg......... 2,109 175,045 26,812/ 46,750 1,754,104/ 906,719
- ---------------
(1) Aggregate market value on date of exercise (closing sale price as reported
in the New York Stock Exchange Composite Transactions Report) less aggregate
exercise price.
(2) Aggregate market value on December 31, 1997(closing sale price as reported
in the New York Stock Exchange Composite Transactions Report) less aggregate
exercise price.
The following table summarizes certain information with respect to benefits
that the proxy rules classify as granted under Long-Term Incentive Plans which
were granted during 1996 (with respect to the 1997-1998 period) to the five
individuals named in the Summary Compensation Table.
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LONG-TERM INCENTIVE PLANS -- AWARDS IN 1996(1)
NAME NUMBER OF UNITS PERFORMANCE PERIOD ESTIMATED FUTURE PAYOUTS
---- --------------- ------------------ ------------------------
M. R. Greenberg.............................. 10,000 Two years 100,000 shares
T. R. Tizzio................................. 4,000 Two years 40,000 shares
E. E. Matthews............................... 3,000 Two years 30,000 shares
E.S.W. Tse................................... 2,000 Two years 20,000 shares
E. G. Greenberg.............................. 2,000 Two years 20,000 shares
- ------------
(1) Awards represent grants of units under the SICO Plan described in Note 1 to
the Summary Compensation Table with respect to the two-year period from
January 1, 1997 through December 31, 1998. The SICO Plan contains neither
threshold amounts nor maximum payout limitations. The number of shares of
AIG Common Stock allocated to a unit upon payout is based on a percentage
selected by SICO's Board of Directors of between 20 percent and 100 percent
of the increase of SICO's retained earnings attributable to the AIG Common
Stock held by SICO over the two-year period. As a result, the number of
shares to be allocated with respect to units held for the 1997-1998 period
and the value of such shares cannot be determined at this time. The number
of shares shown under "Estimated Future Payouts" represent the number of
shares allocable to the named individuals based upon the units awarded to
them for the 1997-1998 period, assuming the percentage selected by the SICO
Board of Directors and the increase in SICO's retained earnings for the
1997-1998 period were the same as those used to allocate the shares of AIG
Common Stock for the 1995-1996 period. As noted in the description of the
SICO Plan in Note 1 to the Summary Compensation Table, prior to pay-out,
the participant is not entitled to vote, dispose of or receive dividends
with respect to such shares, and the shares are subject to forfeiture under
certain conditions, including but not limited to the participant's
voluntary termination of employment with AIG prior to normal retirement
age.
In order to facilitate the performance of their management
responsibilities, AIG provides to the individuals named in the Summary
Compensation Table automobiles and drivers and to these individuals and other
officers and employees the use of a yacht and corporate aircraft, club
memberships, recreational opportunities and clerical and investment management
services. These facilities are provided for use for business purposes and the
costs thereof are considered ordinary and necessary business expenses of AIG.
Any personal benefit any of these persons may have derived from the use of these
facilities or from the services provided is regarded as incidental and the
amount thereof has therefore not been included in the compensation shown in the
Summary Compensation Table. See footnote 2 to the Summary Compensation Table for
a discussion of Mr. Tse's purchase of a residential property from AIA. In
connection with his employment and relocation to New York, AIG has paid certain
expenses involved with Mr. Wisner's purchase of a cooperative apartment and
provided credit support for his mortgage. During 1997, Mr. Martin Sullivan, an
executive officer, held a mortgage loan from AIG in connection with his
relocation from London to New York. The maximum amount of such loan outstanding
during 1997 and at January 31, 1998 was $285,375 at an interest rate of 5.73
percent per annum.
Messrs. E.G. Greenberg, M.R. Greenberg, Matthews, Smith, Tizzio and Tse or
certain of them, are directors and officers of SICO, directors and members of
the Starr Foundation and directors and officers of Starr. These individuals also
receive compensation as officers of Starr for services rendered to Starr as well
as compensation from SICO for services rendered to SICO. These services are not
considered to detract materially from the business time of these individuals
available for AIG matters and such compensation is not included in the
compensation for services to AIG shown in the Summary Compensation Table.
AIG maintains a policy of directors and officers liability insurance for
itself, its directors and officers, its subsidiaries, and their directors and
officers. The premium for the year ending May 24, 1998 is approximately
$2,275,000.
PENSION BENEFITS
Through March 31, 1985, when such plan was terminated, employees of AIG and
its subsidiaries who are citizens of the United States or non-citizens working
in the United States were covered under the American International Group, Inc.
Pension Plan, a contributory, qualified, defined benefit plan ("Original Pension
Plan"). The annual pension for a participant was equal to 1.75% of Average Final
Compensation multiplied by years of credited service as a participant (up to 40
years) less 1.4286% of his Social Security Benefit multiplied by years of
credited service (limited to 35 years). Average Final Compensation was defined
as the average annual compensation of a participant during the 3 consecutive
years in the last 10 years of his credited service affording the highest such
average, or during all of the years of his credited service if less than 3
years. Benefits were paid monthly during the life of the participant, or, if
applicable, during the joint lives of the participant and his contingent
annuitant. The annual retirement allowance for participants with at least 10
years of credited service was not less than 50% of 1.75% of Average Final
Compensation, multiplied by years of credited service, or $1,200, whichever was
greater. On April 1, 1985, a new non-contributory, qualified, defined benefit
plan ("Current Retirement Plan") was established,
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with provisions substantially the same as the Original Pension Plan, except for
the non-contributory feature and except that in the annual pension formula
described above, 1.25% of Average Final Compensation is multiplied by years of
credited service as a participant (up to 44 years) less 1.25% of his Social
Security Benefit multiplied by years of credited service (limited to 35 years).
The 1.25% of Average Final Compensation is also used in the determination of the
minimum retirement allowance. Effective January 1, 1989, the Current Retirement
Plan formula changed in accordance with government mandated regulations from a
Social Security offset to a Social Security integration method of computation
where the offset is the average of the final three years' compensation but no
greater than 150% of the employee's "covered compensation" (the average of the
Social Security Wage bases during the 35 years preceding the Social Security
retirement age) times credited service up to 35 years, multiplied by an
applicable Social Security retirement age factor. For employees terminating from
active service after January 1, 1993, the benefit formula for credited service
on and after April 1, 1985 changed from 1.25% to 1.35% of Average Final
Compensation. Effective January 1, 1996, the Current Retirement Plan formula now
equals 1.25% times Average Final Compensation up to 150% of the employee's
"covered compensation" plus 1.75% times Average Final Compensation in excess of
150% of "covered compensation" times years of credited service prior to April 1,
1985 (up to 35 years) plus 1.75% times Average Final Compensation times years of
credited service in excess of 35 years but limited to 40 years; plus .925% times
Average Final Compensation up to 150% of the employee's "covered compensation"
plus 1.425% times Average Final Compensation in excess of 150% of "covered
compensation" times years of credited service after April 1, 1985 (up to 35
years) plus 1.425% times Average Final Compensation times years of credited
service in excess of 35 years but limited to 44 years.
As a result of the termination of the Original Pension Plan, all benefits
accruing to the termination date became vested regardless of an employee's years
of service and annuities were purchased for benefits payable under that plan.
AIG was entitled to receive the surplus remaining in the Original Pension Plan,
other than the portion of the surplus attributable to employee contributions.
The AIG savings plan ("401(k) Plan") for employees provides for salary
reduction contributions by employees and matching contributions by AIG. The
retirement benefits for most employees who participate in both the Current
Retirement Plan and the 401(k) Plan will be substantially greater than the
benefits which would have been received under the Original Pension Plan.
Annual amounts of normal retirement pension commencing at normal retirement
age of 65 based upon Average Final Compensation and credited service under the
Current Retirement Plan and the Supplemental Plan are illustrated in the
following table:
ESTIMATED ANNUAL PENSION AT AGE 65
TOTAL YEARS OF CREDITED SERVICE AS A PLAN PARTICIPANT
3 YEAR AVERAGE ---------------------------------------------------
FINAL COMPENSATION 10 YEARS 15 YEARS 20 YEARS
- ------------------ --------------- --------------- ---------------
$ 125,000.................... $ 13,896 $ 28,896 $ 43,896
$ 150,000.................... 19,896 37,896 55,896
$ 175,000.................... 25,896 46,896 67,896
$ 200,000.................... 31,896 55,896 79,896
$ 225,000.................... 37,896 64,896 91,896
$ 250,000.................... 43,896 73,896 103,896
$ 300,000.................... 55,896 91,896 127,896
$ 375,000.................... 73,896 118,896 163,896
$ 400,000.................... 79,896 127,896 175,896
$ 500,000.................... 103,896 163,896 223,896
$ 750,000.................... 163,896 253,896 343,896
$1,000,000.................... 223,896 343,896 463,896
$1,375,000.................... 313,896 478,896 643,896
TOTAL YEARS OF CREDITED SERVICE AS A PLAN PARTICIPANT
3 YEAR AVERAGE ---------------------------------------------------------------------
FINAL COMPENSATION 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ------------------ --------------- --------------- --------------- ---------------
$ 125,000...... $ 58,896 $ 58,896 $ 58,896 $ 58,896
$ 150,000...... 73,896 73,896 73,896 73,896
$ 175,000...... 88,896 88,896 88,896 88,896
$ 200,000...... 103,896 103,896 103,896 103,896
$ 225,000...... 118,896 118,896 118,896 118,896
$ 250,000...... 133,896 133,896 133,896 133,896
$ 300,000...... 163,896 163,896 163,896 163,896
$ 375,000...... 208,896 208,896 208,896 208,896
$ 400,000...... 223,896 223,896 223,896 223,896
$ 500,000...... 283,896 283,896 283,896 283,896
$ 750,000...... 433,896 433,896 433,896 433,896
$1,000,000...... 583,896 583,896 583,896 583,896
$1,375,000...... 808,896 808,896 808,896 808,896
- ------------
With respect to the individuals named in the Summary Compensation Table,
other than Mr. Tse, their respective years of credited service (under both
plans) through December 31, 1997 are as follows: M.R. Greenberg--37 years;
Tizzio--29.7 years; Matthews--24.2 years; and E.G. Greenberg--15.2 years.
Pensionable salary includes the regular salary paid by AIG and its subsidiaries
and does not include amounts attributable to supplementary bonuses or overtime
pay. For such named individuals, pensionable salary during 1997 was as follows:
M.R. Greenberg--$1,000,000; Tizzio--$557,029; Matthews--$567,329; and E.G.
Greenberg--$330,000.
During 1986, AIG adopted the Supplemental Plan to provide additional
retirement benefits to designated executives and key employees. Under the
Supplemental Plan, annual benefits, not to exceed 60% of Average Final
Compensation, accrue at a rate of 2.4% of Average Final Compensation for each
year of service or fraction thereof for each full month of active employment.
The benefit payable under the Supplemental Plan is reduced by payments from the
Original Pension Plan, the Current Retirement Plan, Social Security Benefit and
any payments from a qualified pension plan of a prior employer. Messrs.
Greenberg, Matthews and Tizzio were participants in the Supplemental Plan at
December 31, 1997.
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Federal legislation limits the benefits which may be payable from the Current
Retirement Plan. Effective January 1, 1991, the Supplemental Plan was amended to
provide a benefit to most Current Retirement Plan participants in an amount
equal to the reduction in the benefit payable as a result of the Federal
limitation.
Mr. Tse participates in the American International Companies (Hong Kong)
Staff Provident Plan, a defined contribution plan which requires employee
contributions of five percent of salary. Contributions to this plan by AIG vary
based on employee service. During 1997, AIG contributed 12.5 percent of Mr.
Tse's pensionable salary of $352,942 to the plan based on his 36.6 years of
service.
CERTAIN TRANSACTIONS
Certain transactions in 1997 effected in the ordinary course of business
between AIG and its subsidiaries and SICO and Starr are summarized in the
following table:
SICO STARR
AND AND
SUBSIDIARIES SUBSIDIARIES
------------ -------------
(in thousands)
AIG and Subsidiaries Paid:
For production of insurance business*..................... $ -- $ 46,200
For services (at cost)**.................................. 1,200 --
Rentals................................................... 3,900 35
AIG and Subsidiaries Received:
For services (at cost)**.................................. 800 9,900
Rentals................................................... 100 4,000
- ------------
*From these payments, which constituted approximately 38% of Starr's gross
revenues for the year, Starr is required to pay its operating expenses and
commissions due originating brokers. The amounts are paid at terms available
to unaffiliated parties, and represent approximately 0.2% of the gross
revenues of AIG.
**These services are provided and obtained at a cost which, in the opinion of
the management of AIG, does not exceed the cost of obtaining such services
from unaffiliated sources.
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Stock Option and Compensation Committee, currently comprised of Messrs.
Cohen, Conable and Hoenemeyer, is the committee of the Board responsible for
establishing the compensation of the Chief Executive Officer and setting policy
for compensation at the senior levels of AIG, as well as administering AIG's
various employee stock option plans.
In determining the compensation which is appropriate for both the Chief
Executive Officer and other members of senior management, the Stock Option and
Compensation Committee's starting point is AIG's salary administration
philosophy, which is to pay within a range that helps meet business objectives
while considering external and internal influences and the level of funding
allocated to employee compensation. At senior positions, one of the objectives
is to pay at a level that allows AIG to attract, retain and motivate key
executives by paying them competitively compared to peers within a selected
group of major companies in the insurance industry (which includes companies in
addition to those in the peer group used for the performance graph presented
below) while comparing AIG's performance to the performance of those companies.
In so doing, a variety of factors are considered, including the performance of
AIG relative to those companies as measured by standards such as net income and
its growth over prior periods, return on equity and property and casualty
underwriting performance; the level of compensation paid to senior officers
within the selected group of companies; the level of individual contribution by
these senior officers to the performance of AIG, and, in the case of the Chief
Executive Officer, his compensation as a percentage of net income. In
determining 1997 compensation, the Committee did not use a specific formula in
evaluating the various factors, in determining the specific amount of
compensation payable or in determining the allocation of compensation to salary,
bonus and stock option grants but believes that such compensation is
commensurate with the services rendered. The weight given to each factor with
respect to each element of compensation is within the individual discretion and
judgment of each member of the Committee. Each member also takes the
appropriateness of the entire package into account when evaluating each element
of compensation. With respect to the Chief Executive Officer, the bonus was
determined based upon 1997 performance goals established by the Committee
pursuant to a performance-based compensation plan (the "1997 Plan") adopted and
approved by the shareholders in 1997. The 1997 performance goals utilized both
return on equity and net income as such terms are defined in the 1997 Plan.
12
15
AIG's after-tax return on equity (excluding capital gains) was 13.6 percent
for 1996 and 14.1 percent for 1997. The average after-tax return on equity
(excluding capital gains) of AIG's peer group, which is the same as the peer
group used for the performance graph presented below, was reported by Conning &
Company, a leading insurance research and asset management company, to be 9.4
percent for 1996 and estimated by Conning to be 11.3 percent for 1997,
respectively. AIG evaluates underwriting performance on the basis of the
combined ratio (which is the sum of the statutory loss ratio and the statutory
expense ratio), a measure of underwriting performance commonly used by property
and casualty insurers. AIG's property and casualty underwriting performance for
1996 and 1997, as measured by its combined ratio, exceeded that of AIG's peer
group. AIG's combined ratios for 1996 and 1997 were 96.47 and 96.20,
respectively, while those for its peer group averaged 106.6 and 103.8,
respectively. The total compensation of the Chief Executive Officer for 1997
represented approximately .14 percent of net income of AIG for that year. The
cash compensation for the executive officers included in the Summary
Compensation Table ranked at approximately the 70th percentile when compared to
the compensation of executives of the companies included within the peer group
for 1996, the last year for which comparable information is publicly available.
As part of its consideration of the Chief Executive Officer's compensation,
the Committee also reviewed the activities and accomplishments of the Chief
Executive Officer in promoting the long-term interests of AIG through
participation in the debate on the future of the financial services and
insurance industries, in discussions on trade relations and international
affairs and in other similar endeavors.
On the basis of the general factors set forth above, the Committee
determined in 1996 the base salaries and participation in the supplementary
bonus program for 1997 and bonuses for 1996 performance, and in 1997, the base
salaries and participation in the supplementary bonus program for 1998 and the
bonuses for 1997 performance.
The Committee has recognized, in making these compensation determinations,
that AIG has traditionally encouraged long-term strategic management and the
enhancement of shareholder value by providing high performing key executives the
opportunity for superior capital accumulation over the course of their careers
with AIG in the form of stock options. This is a tradition that the Committee
believes to have contributed significantly to AIG's considerable success over
the years.
Section 162(m) of the Internal Revenue Code (the "Code") denies a tax
deduction to any publicly-held corporation such as AIG for compensation paid to
the chief executive officer and four most highly compensated officers of a
corporation in a taxable year to the extent that any such individual's
compensation exceeds $1,000,000 unless certain requirements for
performance-based compensation are satisfied. It is currently the intention of
AIG that all compensation for the Chief Executive Officer in excess of
$1,000,000 will be performance-based and therefore will be deductible in
accordance with Section 162(m). Bonus payments to the Chief Executive Officer
for 1997 pursuant to the 1997 Plan will be deductible by AIG for federal income
tax purposes.
No member of the Committee is a former or current officer or employee of
AIG or any of its affiliated companies or is receiving compensation from AIG in
any capacity other than as a director of AIG and certain of its subsidiaries or
as a committee member of a committee of directors.
Stock Option and Compensation Committee
American International Group,
Inc.
Marshall A. Cohen
Barber B. Conable, Jr.
Frank J. Hoenemeyer
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16
PERFORMANCE GRAPH
The following Performance Graph compares the cumulative total shareholder
return on AIG Common Stock for a five year period (December 31, 1992 to December
31, 1997) with the cumulative total return of the Standard & Poor's 500 stock
index (which includes AIG) and a peer group of companies (the "Peer Group")
consisting of seven multi-line or property/casualty insurance companies to which
AIG has traditionally compared its business and operations: Chubb Corporation,
CIGNA Corporation, CNA Financial Corporation, General Re Corporation, ITT
Hartford Group, Inc., The St. Paul Companies and USF& G Corporation. The
Performance Graphs for the years prior to 1996 included Aetna Life & Casualty
Company, which was acquired by The Travelers Corporation. ITT Hartford Group,
Inc. was not included in the Performance Graphs for years prior to 1996 because
prior to becoming a publicly-traded company in December 1995, it was included in
ITT Corporation, and AIG did not believe that ITT Corporation was comparable to
AIG in its overall business and operations. In light of the lack of any
historical trading information with respect to ITT Hartford Group, Inc., the
addition of ITT Hartford Group, Inc. to the peer group had no impact on the
returns set forth below, other than on the returns for the years ended December
31, 1996 and 1997. Dividend reinvestment has been assumed and, with respect to
companies in the Peer Group, the returns of each such company have been weighted
to reflect relative stock market capitalization.
FIVE YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED ON DECEMBER 31, 1992
MEASUREMENT PERIOD AMERICAN
(FISCAL YEAR COVERED) INTERNATIONAL GROUP S&P 500 INDEX PEER GROUP
DEC-92 100.00 100.00 100.00
DEC-93 113.97 110.08 96.02
DEC-94 127.88 111.53 99.94
DEC-95 181.79 153.45 139.73
DEC-96 213.52 188.68 160.98
DEC-97 322.71 251.63 215.78
II. APPROVAL OF A PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
Your Board of Directors recommends that the shareholders approve a proposal
to amend the Restated Certificate of Incorporation, as amended, of AIG (the
"Certificate") to increase the authorized shares of AIG Common Stock from
1,000,000,000 shares to 2,000,000,000 shares.
At January 31, 1998, there were 699,418,258 shares of AIG Common Stock
outstanding, and an additional 59,703,247 shares of AIG Common Stock were held
in AIG's treasury or by AIG subsidiaries. If the amendment is adopted,
approximately 1,241,000,000 shares of AIG Common Stock would be authorized and
unissued. At December 31, 1997, there were 6,387,725 shares of AIG Common Stock
reserved for issuance pursuant to exercise of stock options under the various
AIG option plans and exercise of purchase privileges under the AIG Employee
Stock Purchase Plan. There are no pre-emptive rights relating to the AIG Common
Stock. Except to the extent that AIG may issue the shares of AIG Common Stock
reserved therefor pursuant to its stock purchase and stock option plans, AIG has
not entered into any agreements or understandings, and has no present plans, for
the issuance of additional shares of AIG Common Stock, but wishes to have such
shares available for future issuances as the need may arise. No further
shareholder approval would be required prior to the issuance of the additional
shares authorized by this amendment.
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17
The Board's purpose in proposing the increase in the number of authorized
shares of AIG Common Stock is to have shares available for future issuances from
time to time as and when the Board determines that such issuances may be
desirable. The Securities and Exchange Commission requires AIG to discuss how
such shares could be used to make it more difficult to effect a change in
control of AIG. For example, the additional shares of AIG Common Stock could be
used to dilute the stock ownership of a person seeking to obtain control of AIG
or could be privately placed with purchasers who would support the Board in
opposing a hostile takeover attempt. This proposal to amend the Certificate is
not in response to any effort of which AIG is aware to accumulate AIG Common
Stock or obtain control of AIG, nor is it part of a plan by management to
recommend a series of similar amendments to the Board of Directors and
shareholders. The Board does not presently contemplate recommending the adoption
of any other amendments to the Certificate which could be construed to affect
the ability of third parties to acquire or change control of AIG.
In addition to AIG Common Stock, under the current Certificate AIG is
authorized to issue 6,000,000 shares of Serial Preferred Stock, par value $5.00
per share, in such series and with such terms as the Board may approve. As of
the date of this Proxy Statement, there were no shares of such Serial Preferred
Stock outstanding.
Approval of this amendment of the Restated Certificate of Incorporation
requires approval by a majority of the shares of AIG Common Stock entitled to
vote thereon. As a result, any shares not voted (whether by abstention, broker
non-vote or otherwise) will have the same effect as a vote against the proposal.
Your Board of Directors recommends a vote FOR the proposal to approve this
Amendment.
III. SELECTION OF ACCOUNTANTS
The Audit Committee and the Board of Directors have recommended the
employment of Coopers & Lybrand L.L.P. as independent accountants of AIG for
1998. That firm has no direct or indirect financial interest in AIG or any of
its parents or subsidiaries. Representatives of that firm are expected to be
present at the Annual Meeting with an opportunity to make a statement if they
desire to do so and to be available to respond to appropriate questions.
Approval of the selection of accountants requires approval by a majority of
the shares of AIG Common Stock present and entitled to vote at the meeting.
Your Board of Directors recommends a vote FOR the proposal to employ
Coopers & Lybrand L.L.P.
IV. SHAREHOLDER PROPOSAL
The Presbyterian Church (U.S.A.), 100 Witherspoon Street, Louisville,
Kentucky 40202, which states that it owns 142,462 shares of AIG Common Stock,
has notified AIG in writing that it intends to present a resolution for action
by the shareholders at the Annual Meeting. The text of the resolution and the
supporting statement submitted by the sponsors are as follows:
"AMERICAN INTERNATIONAL GROUP INDEPENDENT NOMINATING COMMITTEE
WHEREAS, American International Group has, as a practical matter, no Nominating
Committee, the full Board acting on the recommendation of the Executive
Committee, most of whom are top management officials of American International
Group;
WHEREAS, we believe our company would benefit from the leadership of directors
who have been nominated through an independent process;
WHEREAS, two of the three elected to the Board since 1996 have been employees of
the company;
WHEREAS, we believe the creation of a Nominating Committee composed of
independent directors would strengthen the possibility of having directors who
will bring a fresh and independent viewpoint when needed to the deliberations of
our Board;
THEREFORE, resolved that the Board of Directors create a Nominating Committee of
at least four members. All members of the Nominating Committee shall be
independent directors who:
1. have not been an executive of the company or its affiliates during
the last five years.
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2. is not, and have not been, a member of a company that is one of the
company's paid advisors or consultants.
3. is not employed by a significant customer or supplier.
4. do not, and did not, have a personal services contract with the
company.
5. are not employed by a tax-exempt organization that receives
significant contributions from the company.
6. are not a relative of any management of the company.
7. are not officers of a corporation on which the Chairman, CEO,
President, or any other officer of American International Group
serves as directors.
SUPPORTING STATEMENT
We believe that directors who are free of any relationships which might
influence or preclude their ability to exercise oversight of management and
operations when needed are beneficial to a corporation. Such independence can
serve the shareholders in numerous ways including resolution of conflicting
views within management, or raising financial, public policy or issues of
corporate policy and practice, such as equal employment opportunity and
workforce diversity, which need addressing.
Corporate leaders and institutional investors recognize the value of
independence. A November 1992 survey of 600 directors of Fortune 1,000
corporations, conducted by Directorship and endorsed by the Business Roundtable,
found that 93 percent believed that a majority of the board should be composed
of outside, independent directors. A majority also believed that the nominating
committee should consist entirely of outside, independent directors. We agree.
A Nominating Committee composed solely of independent directors would
remove any question that candidates for the Board had been selected only by the
current management. The use of the AIG Executive Committee, most of whose
members are current management, to initially screen possible Board members may
result in a Board with independent, impartial directors. This is not guaranteed,
however. The adoption of this proposal would establish an unclouded process and
insure that candidates are proposed through a thoroughly independent, objective
process. We ask for your support."
MANAGEMENT'S STATEMENT IN OPPOSITION
Your Board of Directors opposes this proposal. Your current Board and its
predecessors have led AIG to prosperity and growth in value for all
shareholders; AIG's long-term performance has consistently outpaced that of its
competitors. Your Board of Directors does not believe that there would be any
demonstrable improvement in the composition of the Board or the performance of
AIG if the proposal were to be adopted. Your Board of Directors stresses the
complete participation of all members in the Board decision-making process,
without distinction based on employee or independent status. Your Board believes
that the views of management are critically important to the nominating process
at AIG, where management directors have substantial personal ownership of AIG
shares and their interests as shareholders are entirely consistent with those of
nonaffiliated shareholders. There is no justification for excluding this
substantial interest from the nominating process. Because in practice your Board
serves as a committee of the whole in determining nominees for membership, the
views of the independent directors, who comprise a majority of the Board, are
well represented. Any member of the Board can present names for consideration,
and no action is taken on any candidate until that candidate is discussed with
each non-employee member of the Board. In sum, your Board of Directors believes
that its existing policies and practices with respect to the nominating process
have resulted in significant benefit to both AIG and its shareholders, and that
the suggested changes are neither necessary nor appropriate. Therefore, your
Board of Directors urges a vote against this proposal.
Approval of this proposal requires approval by a majority of the shares of
AIG Common Stock present and entitled to vote at the meeting.
Your Board of Directors recommends a vote AGAINST this proposal.
V. SHAREHOLDER PROPOSAL
Christian Brothers Investment Services, Inc., 675 Third Avenue, 31st Floor,
New York, New York 10017-5704, which states that it owns 16,650 shares of AIG
Common Stock, has notified AIG in writing that it intends to present a
resolution for action by the shareholders at the Annual Meeting. The
Congregation of the Holy Cross, Southern Province, 2111 Brackenridge Street,
Austin, Texas 78704-4322; the Domini Social Equity Fund, 6 St. James Avenue,
Boston, Massachusetts 02116; the Sisters of Charity of the Incarnate Word Health
Care System, 2600 North Loop
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West, Houston, Texas 77092; the Mercy Consolidated Asset Management Program, 20
Washington Square North, New York, New York 10011; the Women's Equity Mutual
Fund, 625 Market Street, San Francisco, California 94105; the Sisters of Notre
Dame de Namur, California Province, 14800 Bohlman Road, Saratoga, California
95070-6399; the Sisters of the Presentation, 2340 Turk Boulevard, San Francisco,
California 94118-4340; the Sisters of St. Dominic, Congregation of the Most Holy
Name, 1520 Grand Avenue, San Rafael, California 94901-2236; the Women's Division
of the General Board of Global Ministries of the United Methodist Church, 475
Riverside Drive, New York, New York 10115; and United States Trust Company
Boston, 40 Court Street, Boston, Massachusetts 02108, who state that they hold
750 shares, 59,600 shares, 32,875 shares, 150 shares, 862 shares, 4,218 shares,
964 shares, 600 shares, 15,955 shares and over 58,000 shares, respectively, of
AIG Common Stock, have notified AIG that they are joining as proponents of the
resolution to be proposed by the Christian Brothers Investment Services, Inc.
The text of the resolution and the supporting statement submitted by the
sponsors are as follows:
"BOARD INCLUSIVENESS REVIEW
We believe that our Board of Directors needs to be more representative of
shareholders and reflect a diverse population, workforce and marketplace so our
company can remain competitive. The loss of $170 million in the Texaco
discrimination settlements and other lawsuits like Shoney's, Denny's, State Farm
and Publix are a few examples that demonstrate a greater need for expanded
diversity on Board of Directors.
Minorities held only 4 percent of board seats in 878 of the largest public
companies in 1996, according to the publication, The Directorship. White males
hold the vast majority of senior management jobs, 97 percent of senior managers
in the 1995 Fortune 500 were white and 95 percent were male according to the
Glass Ceiling Commission report.
In November 1996, a Blue Ribbon Commission of the National Association of
Corporate Directors released New Standards for Board Professionalism -- a
sweeping set of recommendations for a professional boardroom culture. One urged
boards to "seriously consider . . . the distinctive skills, perspectives and
experiences that candidates diverse in gender, ethnic background, geographic
origin and professional experience . . . can bring to the boardroom."
A 1996 survey by Chief Executive magazine and Heidrick & Struggles found
that 44 percent of 709 corporate respondents were actively planning to change
their board composition in the near future.
Robert Campbell, CEO of Sun Oil, stated in The Wall Street Journal on
August 12, 1996 that, "Often what woman or minority person can bring to the
board is some perspective a company has not had before--adding some modern-day
reality to the deliberation process. Those perspectives are of great value, and
often missing from an all white-male gathering. They can also be inspirational
to the company's diverse workforce."
W.R. Grace's 1996 proxy states their Board ". . . recognizes that its
composition should reflect the global nature of the Company's operations and the
diversity of its workforce. The Board also recognizes that it is in a unique
position to "set the tone at the top" and to demonstrate its belief that
diversity makes good business sense."
Therefore be it resolved shareholders request that the Board of Directors
prepare at reasonable expense, a report by September, 1998 on the company's
efforts for selecting a high-performance and inclusive board which will assist
the shareholders and the company by including:
1. A policy statement committing the company to board inclusiveness, a
program of steps, and the timeline to move further in that direction.
2. The Board issue a report by September 1998 summarizing information and
efforts to increase the diversity:
a) breakdown of minority and women in the ranks of senior executives
b) breakdown of our board of directors by race and gender
c) breakdown of our board of directors nominating, compensation and
executive committees by race and gender
d) a performance report of our executive board search firms on diversity
e) how our company compares within its industry"
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MANAGEMENT'S STATEMENT IN OPPOSITION
Your Board of Directors opposes this proposal. In the selection of
candidates for Board membership, your Board seeks to select and recommend the
best qualified persons based upon their individual talents, experience and
abilities without regard to race, religion, national origin or gender. In your
Board of Directors' judgment, providing reports or establishing formalistic
procedures and arbitrary deadlines would not enhance the current Board selection
process and would therefore not serve shareholder interests.
Approval of this proposal requires approval by a majority of the shares of
AIG Common Stock present and entitled to vote at the meeting.
Your Board of Directors recommends a vote AGAINST this proposal.
VII. SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
All suggestions from shareholders are given careful attention. Proposals
intended for inclusion in next year's proxy statement should be sent to the
Secretary of AIG at 70 Pine Street, New York, New York 10270 and must be
received by December 8, 1998.
VII. OTHER MATTERS
Your Board of Directors knows of no other matters to be presented at the
meeting. If the proposal relating to the preparation of a report on global
warming that was excluded from this Proxy Statement in accordance with Rule 14a-
8 promulgated under the Securities Exchange Act of 1934, as amended, is properly
brought before the meeting, it is intended that the persons named in the
accompanying proxy form will use their discretionary authority to vote the
proxies against such proposal. If any other matters properly come before the
meeting, it is the intention of the persons named in the accompanying proxy form
to vote the proxy in accordance with their judgment on such matters.
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement has been or will be specifically
incorporated by reference into any other filing by AIG under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the
sections of this Proxy Statement entitled "Report of the Stock Option and
Compensation Committee on Executive Compensation" and "Performance Graph" shall
not be deemed to be so incorporated, unless specifically otherwise provided in
such filing.
PROXY SOLICITATION
AIG will bear the cost of this solicitation of proxies. Proxies may be
solicited by mail, personal interview, telephone and telegraph by directors,
their associates, and approximately eight officers and regular employees of AIG
and its subsidiaries. In addition to the foregoing, AIG has retained Morrow &
Co. to assist in the solicitation of proxies for a fee of approximately $10,000
plus reasonable out-of-pocket expenses and disbursements of that firm. AIG will
also reimburse brokers and others holding stock in their names, or in the names
of nominees, for forwarding proxy materials to their principals.
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P R O X Y
AMERICAN INTERNATIONAL GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints M.R. Greenberg, Edward E. Matthews and
Thomas R. Tizzio, and each of them, with full power to act without the other
and with full power of substitution, as proxies to represent and to vote, as
directed herein, all shares the undersigned is entitled to vote at the annual
meeting of the shareholders of American International Group, Inc. to be held at
Eighth Floor, 72 Wall Street, New York, New York 10270, on Wednesday May 20,
1998 at 11:00 a.m., and all adjournments thereof, as follows:
(change of address/comments)
_________________________________
_________________________________
_________________________________
(if you have written in the above
space, please mark the corres-
ponding box on the reverse side
of this card)
_____________
| |
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE | SEE REVERSE |
REVERSE SIDE AND RETURN IT PROMPTLY USING THE ENCLOSED | SIDE |
POSTAGE PREPAID ENVELOPE. |_____________|
24
____
| | Please mark your |
| X | votes as in this | 2742
|____| example. |______
Unless otherwise marked, the proxies are appointed with authority
to vote "FOR" all nominees for election, "FOR" Item 2 and Item 3,
"AGAINST" Item 4 and Item 5, and in their discretion to vote upon
matters that may properly come before the meeting.
______________________________________________________________________________
| The Board of Directors recommends a vote "FOR" all nominees in Item 1, and |
| "FOR" Items 2 and 3. |
|______________________________________________________________________________|
| |
| WITHHELD EXCEPT- |
| FOR AUTHORITY IONS* |
|1. Election as Directors of the following |
| identified in the Proxy Statement: [ ] [ ] [ ] |
| |
| M. Aidinoff, L. Bentsen, P. Chia, |
| M. Cohen, B. Conable, M. Feldstein, |
| L. Gonda, E. Greenberg, M. Greenberg, |
| C. Hills, F. Hoenemeyer, E. Matthews, |
| D. Phypers, H. Smith, T. Tizzio, E. Tse, |
| F. Wisner |
| |
| |
| *INSTRUCTION: To withhold authority to |
| vote for any of the foregoing individuals, |
| mark the exceptions box. Write the name(s) |
| on the following line. |
| |
| |
| ________________________________________ |
| |
| |
|2. Approval of Amendment of Restated Certificate FOR AGAINST ABSTAIN |
| of Incorporation |
| [ ] [ ] [ ] |
| |
| |
|3. Appointment of Independent Accountants [ ] [ ] [ ] |
|______________________________________________________________________________|
______________________________________________________________________________
| The Board of Directors recommends a vote "AGAINST" Items 4 and 5 |
|______________________________________________________________________________|
| |
|4. Shareholder Proposal Described in the |
| Proxy Statement [ ] [ ] [ ] |
| |
| |
|5. Shareholder Proposal Described in the [ ] [ ] [ ] |
| Proxy Statement |
|______________________________________________________________________________|
If you have noted either an Address Change or made [ ]
Comments on the reverse side of the card, mark here.
Please Sign, Date and Return the
Proxy Card Promptly Using the
Enclosed Envelope.
SIGNATURES(S) ________________________________________ DATE __________________
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
