American International Group Inc
The approval, which the company announced on Tuesday, means that AIG can pay Benmosche an already agreed annual salary of $3 million in cash and $4 million in fully-vested AIG stock.
He is restricted from selling the vested AIG stock for 5 years from his August start date.
As part of the deal, Benmosche has also signed an agreement that would bar him from working for AIG's competitors when he eventually leaves the company, said a source familiar with developments.
The agreement comes after Benmosche, a former chief executive of large U.S. life insurer MetLife Inc
However, Benmosche told employees in a later letter that he was totally committed to seeing the company through its difficulties. He has also now given the board an assurance that he will stay, said the source, who asked not to be identified because he was not authorized to speak about these developments.
Benmosche could also be eligible for a performance bonus that would raise his total compensation as high as $10.5 million.
As one of the largest recipients of U.S. aid, AIG has to comply with pay regulations imposed on the top 100 executives at companies that have received the largest loans under the U.S. Treasury's Troubled Asset Relief Program. Benmosche's pay package had already been approved by Washington pay czar Kenneth Feinberg.
Once the world's largest insurer, AIG was saved last September by a taxpayer bailout that has grown to as much as $180 billion, including more than $80 billion in loans. The company is around 80 percent-owned by U.S. taxpayers.
AIG's shares closed down 28 cents at $35 on the New York Stock Exchange on Tuesday.
(Reporting by Lilla Zuill; Editing by Phil Berlowitz)