American International Group Inc. abandoned the use of credit-default-swap spreads as a measure of long-term performance for its chief executive officer — a partial victory for activist investor Carl Icahn, who said the arrangement created the wrong incentives.

A long-term incentive starting this year will probably be based entirely on AIG’s total shareholder return relative to peers, the New York-based insurer said late Tuesday in a regulatory filing. Previously, CDS accounted for 25 percent.

Icahn complained in January that a tie between executive pay and CDS would discourage management from splitting the company. He called on the insurer’s board to end the link and emphasize return on equity instead. AIG CEO Peter Hancock has said bondholders could be hurt by a breakup, a view echoed by credit analysts and ratings firm Moody’s Investors Service, which cited the potential loss of earnings diversity and scale.

The change is a “structural enhancement” for 2016, AIG said in the filing, adding that the move was made “in response to shareholder feedback.”

Risk Protection

To protect bondholders, AIG introduced a provision to account for creditworthiness in setting compensation if yields perform poorly compared with most industry rivals. The change is partially due to “decreased liquidity in the CDS market,” AIG said in the filing, and will still “protect against excessive risk-taking.”

AIG agreed in February to nominate billionaire activist John Paulson and a representative of Icahn’s firm to the board. Icahn didn’t immediately respond to a request for comment left with his assistant on Tuesday. An AIG representative declined to comment beyond the filing.

Credit-default swaps are derivatives used by banks and fund managers to hedge against losses on debt. AIG was bailed out by the U.S. in 2008 after enduring losses on CDS contracts in which the company backed subprime mortgages.

Hancock’s short-term incentive pay slipped 29 percent to $2.5 million last year, as he missed targets tied to profitability, return-on-equity and expense reductions, AIG said in the filing. His total compensation package rose 3.6 percent to $12.5 million as his stock award increased in his first full year as CEO.

Fasano’s Pay

Hancock has hired executives since taking charge of the insurer in September 2014. Phil Fasano received an $8.4 million package as his annual pay at AIG was disclosed for the first time in the newly created position of chief information officer. Of that sum, $3.4 million was to compensate Fasano for pay he gave up at his former employer, and $1 million was a transition award, AIG said.

Doug Dachille, a former colleague of Hancock at J.P. Morgan & Co. who became the insurer’s chief investment officer last year, received $20 million in cash and restricted stock as AIG acquired his investing firm. He had a 43 percent stake in the company, First Principles Capital Management, according to the filing.