American International Group Inc says it is limiting how much it pays top executives, including a $US1 salary for this year and the next to chief executive Edward Liddy.
The decision is one of many broader moves made by the troubled New York-based insurer, which has been under pressure to restrict executive pay since accepting billions in government assistance to save it from collapse. AIG has received about $US150 billion ($229.7 billion) so far, more than any other company.
It was once the world's largest insurer with customers around the globe, and regulators feared the possible effect an AIG collapse would have had on the world's financial system.
The company said on Tuesday there would be no 2008 annual bonuses and no salary increases through 2009 for AIG's top seven officers and no salary increases through 2009 for the 50 next-highest AIG executives.
"We believe these actions demonstrate that we are focused on overcoming our financial challenges so AIG can return value to taxpayers and shareholders," Liddy said in a statement.
Liddy took over at AIG in September.
His predecessor, Robert Willumstad, turned down a $US22 million severance package when he left.
Martin Sullivan, who preceded Willumstad and left in June this year, received $US14.3 million, a 32 per cent drop on the year before.
Liddy's compensation at Allstate Corporation in 2006 - his last year at the helm of the insurer - was $US24 million, according to Bloomberg.
AIG shares fell nine cents, or five per cent, to $US1.68 in midday trading.
The announcement comes after New York Attorney General Andrew Cuomo sent a letter to Liddy earlier this month saying AIG should be "completely transparent" about its compensation plans for 2008.
In mid-September, the Federal Reserve said it would offer two loans totalling $US123 billion to AIG to help the insurer stave off bankruptcy. AIG was later allowed to access another $US20.9 billion through the Fed's "commercial paper" program. And earlier this month, the government announced new financial assistance to the company.
In a letter to Cuomo on Tuesday, Liddy said AIG was "extremely grateful" for the support it has received from American taxpayers, and said the company does "recognise the obligation we have to use that support to help AIG recover, contribute to the economy and repay taxpayers".
AIG also said no taxpayer dollars will be used for any annual bonuses or future cash performance awards for AIG's top management positions.
Liddy, who joined the company in mid-September, will not receive an annual bonus this year or next, although he may be eligible for a special bonus for "extraordinary performance" payable in 2010, the company said.
Earlier this month, AIG ended 14 voluntary deferred compensation programs, resulting in $US500 million of payouts due in the first quarter of 2009.
The company said it made the move to prevent employees from having to leave to collect deferred pay. The old plans had been set up so that employees could defer pay voluntarily and collect it when they left AIG, no matter the reason.
Several struggling financial institutions have announced in recent weeks that they were cancelling bonuses for top executives, including Goldman Sachs, the Swiss bank UBS and the British bank Barclays.
Cuomo has praised those moves and suggested that other Wall Street institutions should follow suit, especially those receiving federal bailout money.