American International Group, Inc. announced voluntary restrictions on executive compensation Tuesday.

The restrictions include a US$1 salary for its chief executive officer; no 2008 annual bonuses and no salary increases through 2009 for AIG’s top-seven-officer leadership group; and no salary increases through 2009 for the 50 next-highest executives, in addition to other bonus, severance and retention award restrictions.

The troubled insurance giant is also developing a funding structure to ensure that no taxpayer dollars are used for annual bonus or future cash performance awards for AIG’s “senior partners,” the top 60 members of management.

“We are extremely grateful for the assistance we have received, and we know we have an obligation to use that assistance to help AIG recover, contribute to the economy and repay taxpayers,” said Edward Liddy, AIG’s chairman and CEO. “This action by the senior management team demonstrates not only that we understand our obligation to taxpayers and shareholders, but also that we are committed to the future success of this organization.”

Under the voluntary restrictions announced today: Liddy, who joined AIG on September 18, will receive an annual base salary of US$1 for 2008 and 2009. His initial compensation will consist entirely of equity grants. He will not receive an annual bonus in those years, although he may be eligible for a special bonus for extraordinary performance payable in 2010. Liddy will not be eligible for severance payments.

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