[Infowarrior] - U.S. to Order Steep Pay Cuts at Firms That Got Most Aid

[Richard Forno]

About time......if we're bailing you out for your idiocy,  the least  
you can do is take a pay cut.  --rf


October 22, 2009
U.S. to Order Steep Pay Cuts at Firms That Got Most Aid
By STEPHEN LABATON
http://www.nytimes.com/2009/10/22/business/22pay.html?hp=&pagewanted=print

WASHINGTON — Responding to the growing furor over the paychecks of  
executives at companies that received billions of dollars in federal  
bailouts, the Obama administration will order the companies that  
received the most aid to deeply slash the compensation to their  
highest paid executives, an official involved in the decision said on  
Wednesday.

Under the plan, which will be announced in the next few days by the  
Treasury Department, the seven companies that received the most  
assistance will have to cut the cash payouts to their 25 best-paid  
executives by an average of about 90 percent from last year. For many  
of the executives, the cash they would have received will be replaced  
by stock that they will be restricted from selling immediately.

And for all executives the total compensation, which includes bonuses,  
will drop, on average, by about 50 percent.

The companies are Citigroup, Bank of America, the American  
International Group, General Motors, Chrysler and the financing arms  
of the two automakers.

At the financial products division of A.I.G., the locus of problems  
that plagued the large insurer and forced its rescue with more than  
$180 billion in taxpayer assistance, no top executive will receive  
more than $200,000 in total compensation, a stunning decline from  
previous years in which the unit produced many wealthy executives and  
traders.

In contrast to previous years, an official said, executives in the  
financial products division will receive no other compensation, like  
stocks or stock options.

And at all of the companies, any executive seeking more than $25,000  
in special perks — like country club memberships, private planes,  
limousines or company issued cars — will have to apply to the  
government for permission. The administration will also warn A.I.G.  
that it must fulfill a commitment it made to significantly reduce the  
$198 million in bonuses promised to employees in the financial  
products division.

The pay restrictions illustrate the humbling downfall of the once- 
proud giants, now wards of the state whose leaders’ compensation is  
being set by a Washington paymaster. They also show how Washington in  
the last year has become increasingly powerful in setting corporate  
policies as more companies turned to the government for money to  
survive.

The compensation schedules set by Kenneth R. Feinberg, the special  
master at Treasury handling compensation issues, comes as many other  
banks that received smaller but significant taxpayer assistance in the  
last year have been reporting huge year-end bonuses, setting off a new  
round of recrimination in Washington about the bailout of Wall Street.

Since his appointment last June by Treasury Secretary Timothy F.  
Geithner, Mr. Feinberg has spent months in negotiations with the  
companies as he seeks to balance compensation concerns against fears  
at the companies that any huge restrictions in pay could prompt an  
exodus of executives. Under a law adopted earlier this year, the  
Treasury Department was instructed to examine the salaries and bonuses  
for the five most-senior executives and their 20 most highly paid  
employees at companies that have received extraordinary assistance.

Mr. Feinberg has already achieved significant results at several  
companies. As a result of his discussions, Kenneth D. Lewis, the head  
of Bank of America who recently resigned, agreed to forgo his salary  
and bonus for 2009. (He will still receive a pension of $53.2 million,  
although Mr. Feinberg can issue an advisory opinion challenging it  
that would carry political weight.) And fearful of a political  
backlash over the pay of Andrew J. Hall, a successful energy trader  
who received nearly $100 million last year, Citigroup agreed two weeks  
ago to sell its Phibro unit that Mr. Hall heads to Occidental Petroleum.