AIG will limit the pay of top executives following criticism by US politicians, and CEO Edward Liddy has decided to pay himself an annual base salary of just $US1 ($1.50) for 2008 and 2009.

In a statement last week the insurer revealed that Mr Liddy, who joined AIG on September 18, will receive an initial pay consisting entirely of equity grants, which it says “shows his confidence in AIG and its team”.

In addition, he will not receive an annual bonus but might be eligible for a special bonus for “extraordinary performance”, which will be payable in 2010.

The company is also freezing the annual bonuses and salary increases of AIG’s top seven officers for 2008 and 2009, and the salary increases next year for the 50 next-highest AIG executives.

Mr Liddy says the move was prompted by “the obligation to… help AIG recover, contribute to the economy and repay taxpayers”.