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The chair of a Congressional oversight panel said Wednesday he was troubled by a shift in the compensation culture at American International Group Inc. (AIG) that was detailed in a new government audit.

Rep. Edolphus Towns, D-N.Y., chair of the House Committee on Oversight and Government Reform, said that a new report formally released Wednesday shows a significant shift in the way AIG employees were compensated, with executives pulling in more short-term rewards since 2007, when the company's losses began to grow.

"The era of instant gratification had arrived at AIG," Towns said in prepared remarks. "Long-term incentives were rejected in favor of short-term gains."

The audit by Neil Barofsky, the special inspector general for the government's $700 billion financial rescue plan, showed that AIG employees were previously compensated more heavily with long-term incentives they received only at retirement, Towns said. But in 2007, executives "updated" their compensation packages with shorter-term rewards, including the $168 million in retention payments made to employees of the financial services division that drew criticism from public officials last March. Since last September, the government has dedicated more than $180 billion to help bail out the insurance company.

AIG executives promised to repay $45 million of the retention payments, but so far have only paid $19 million, according to the report. Towns said that the panel would continue to monitor how AIG and other bailed-out companies compensate their highest-paid employees. Kenneth Feinberg, the U.S. Treasury's special master for executive compensation, is scheduled to testify in front of the committee in two weeks.

-By Kristina Peterson, Dow Jones Newswires; 202-862-6619; kristina.peterson@dowjones.com