Pay Cut for 25 Top Earners at 5 Bailed-Out Firms
March 23, 2010 - 3:40 PMThe administration's pay czar said Tuesday that the top 25 earners at five companies still receiving extraordinary aid from the government's bailout fund will be paid an average 15 percent less in 2010 than in 2009 under his restrictions.
The companies include troubled automakers General Motors and Chrysler and insurance giant American International Group.
Pay czar Kenneth Feinberg also said he is asking 419 companies that received bailout money to provide details of compensation they received at the height of the financial crisis at the end of 2008 and early 2009.
Feinberg's announcement was the administration's latest effort to deal with public outrage over lucrative pay packages provided to executives at companies receiving billions of dollars in taxpayer support.
Detailing the 2010 pay rules, Feinberg said cash salaries would be capped at $500,000 for 82 percent of the top 25 executives at the five firms. These executives would have to receive any further compensation in stock. Feinberg is seeking to link the executives' decisions more closely to the success of their companies.
The decisions announced Tuesday followed a pattern of rulings Feinberg made in October. That is when he issued compensation rules for the seven companies receiving the most money from the government's $700 billion bailout fund.
Feinberg said cash salaries would be cut on average 33 percent from the 2009 levels for the top 25 executives. The total compensation, which includes cash and payments in stock, will drop on average 15 percent, he said.
Since his October pay decisions, two of the biggest companies, Citigroup and Bank of America, have paid back the government support and are no longer covered by Feinberg's pay guidelines.
The five companies still covered are General Motors and its financing arm, GMAC, Chrysler and its financing arm, Chrysler Financial, and AIG.
The "look back" letters will be sent to 419 companies that received bailout money before Feb. 17, 2009. The companies include major firms such as Goldman Sachs and JPMorgan Chase. For executives who make more than $500,000, their firms are asked to detail what forms of compensation they received from the time they got their bailout money until Feb. 17.
Those companies will have 30 days to provide Feinberg with that information. He said he planned to report on his findings within two months after receiving the data.
Under the law, Feinberg cannot require executives to return any compensation such as 2008 bonuses that he deems excessive. But Feinberg said he would review the compensation paid during that period to see if any of it could be deemed "inconsistent with the public interest."
He said one factor he'd consider in determining whether the payments were excessive would be whether the company had repaid its bailout money.
"If a company has completely repaid with interest, that makes it somewhat easier to conclude they were acting in the public interest," Feinberg told reporters at a briefing.
The review of the 419 companies that received government aid was required by last year's $787 billion economic stimulus measure. The law required a review of compensation from the time the company received bailout money until the stimulus bill became law Feb. 17. The stimulus measure also included the tighter compensation rules that Feinberg is now applying.
Feinberg said the results of his review refuted the companies' complaints that pay restrictions would drive away top talent. Among the five companies still receiving extraordinary aid from the bailout fund, 84 percent of the top executives covered by the 2009 pay rulings are still at those firms and would be covered by the 2010 guidelines, he said.
"These statistics undercut the argument that if you don't pay more, people will leave," Feinberg said. "They are not leaving."
In his letters to the five companies detailing his 2010 pay decisions, Feinberg generally praised them for adhering to the guidelines he had put forward last year.
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