American International Group Inc strongly objected last year when U.S. pay czar Kenneth Feinberg imposed large cuts in the cash salaries of two of its top executives, regulatory filings showed on Monday.

Feinberg slashed the salaries of David Herzog, chief financial officer, and Kristian Moor, executive vice president of property-casualty, to $350,000 and $450,000 from $675,000 and $1 million, respectively, effective November 1, 2009.

The two executives, however, received raises for 2010.

Chief Executive Robert Benmosche got cash and stock compensation of $2.7 million in 2009. He was also given a $1.38 million incentive award for 2009. In 2010, he is allowed a maximum compensation of $10.5 million.

Separately, Fairholme Capital Management reported a 11.1 percent stake in AIG, making it the largest shareholder in the insurer after the U.S. government, which owns nearly 80 percent, according to Thomson Reuters data.

Fairholme, founded Bruce Berkowitz, has about $16.5 billion of assets under management. It is also one of the investors who have offered to bankroll U.S. mall owner General Growth Properties Inc's exit from bankruptcy.

AIG also disclosed that Feinberg allowed for exemptions from a $500,000 limit on 2009 salaries of Rodney Martin, executive vice president for life insurance, and Nicholas Walsh, executive vice president for foreign general insurance.

For 2010, however, Feinberg brought down the cash salaries of Martin's and Walsh's compensation to below $500,000, but increased the stock component of their pay.

Still, the maximum allowed compensation in 2010 was reduced to $5.6 million from $7.26 million for Martin and to $5.04 million from $6.67 million for Walsh, the filing showed.

The government-imposed limitations on cash salaries meant cash compensation as a percentage of total pay was significantly lower than its competitors, AIG said in a U.S. Securities and Exchange Commission filing.

AIG, which was bailed out by the government with a $182.3 billion taxpayer funded rescue package, added it was concerned the limit will put it at a competitive disadvantage.

AIG has also recommended increasing the retirement age of directors to 75 from 73.

AIG plans to hold its annual meeting of shareholders on May 12.

(Reporting by Paritosh Bansal; editing by Andre Grenon)

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