Insurer AIG has been cleared to pay retention bonuses to senior executives after their ongoing service was deemed critical to the future success of the company.

Pay rulings released on Friday by Kenneth Feinberg, the US Government’s “Special Master for Troubled Asset Relief Program”, cover AIG, Citigroup, General Motors and GMAC.

Mr Feinberg says retention bonuses paid to AIG employees can proceed because they are “deemed by the Federal Reserve Bank of New York, the Treasury and AIG itself to be particularly critical to AIG’s long-term financial success”.

The new compensation rulings seek to align executive pay and bonuses more closely to performance and restrict measures such as short-term cash compensation.

While cash salaries have generally been limited to $US500,000 ($550,000), about 12 exceptional cases have been identified by independent company remuneration committees.