The Obama administration's pay czar on Tuesday clamped down on 2010 pay at five U.S. firms that still depend on a government lifeline, but boasted that his burdensome restrictions are not sending talented workers fleeing for the exits.
Kenneth Feinberg, a Washington lawyer who was appointed last year to oversee pay at U.S. companies receiving taxpayer bailouts, cut 2010 pay for the highest-paid employees at those firms on average by 15 percent, compared with 2009. Cash pay was cut 33 percent on average, the Treasury Department said.
The firms are AIG
It is unclear how much the most recent cuts compare to Feinberg's 2009 rulings.
Last October, Feinberg slashed overall pay by 50 percent and cash pay by 90 percent for the last two months of the year at the seven firms then under his authority. But the decreases that Feinberg reported on Tuesday compare total pay for 2010 to total-year pay for 2009.
The harsh rulings in October sent some firms, namely Bank of America
Other firms, such as Goldman Sachs, have sought Feinberg's advice on how to restructure their compensation packages in hopes it would shield them from public scrutiny of huge paychecks. However, Goldman Chief Executive Lloyd Blankfein still secured a $9 million bonus last year.
The Treasury, where Feinberg's office is housed, tried to prove that Feinberg's rulings have not been overly harsh. It said about 84 percent of the top earners under the pay czar's jurisdiction are still with their firms despite having their pay dramatically cut back.
People at these five companies are not leaving the companies to go elsewhere, Feinberg told a news briefing. There is a striking number of holdovers.
Feinberg is in charge of setting the pay packages for the 25 top earners at five firms that received exceptional assistance from the government's $700 billion TARP fund and have not yet substantially repaid the funds.
Pay has been a flashpoint throughout the financial meltdown. The anger over pay reached a fever pitch in March 2009 when the public learned that employees at the AIG unit that was largely responsible for the insurer's near-collapse were still receiving multi-million-dollar retention bonuses.
NARROW MANDATE, BIG INFLUENCE
Although Feinberg has a narrow mandate, he has promoted his rulings for the few firms as a blueprint that other firms, especially Wall Street, should voluntarily adopt.
Feinberg on Tuesday reiterated his general principles, including eliminating guaranteed cash bonuses, rewarding employees with long-term restricted stock, and abolishing golden parachutes for executives leaving the company.
He noted that employees at AIG's Financial Products unit have agreed to repay $45 million in retention payments. He said cash salaries at the unit will stay frozen, with one exception.
For 2010 at AIG, overall cash pay decreased 63 percent, or $22.2 million, from the prior year. But total direct compensation increased 2 percent, or $1.9 million.
Feinberg pointed out that the chief executive of auto finance company GMAC is receiving no cash salary, only long-term stock.
The CEO of Chrysler Group LLC, Sergio Marchionne, who also runs Italian carmaker Fiat SpA
At General Motors, cash salaries for returning executives in the company's top-25 are due to fall 14.2 percent from last year.
Feinberg is also stretching the bounds of his legal authority. On Tuesday his office sent out letters to 419 TARP firms, including those that have repaid the funds such as Goldman Sachs and JPMorgan Chase, asking to look back at past pay.
Feinberg wants to see if any pay was excessive from October 2008, or when firms first received TARP funds, though February 2009, when legislation was passed attaching pay restrictions to recipients of the bailout money.
If any pay is above $500,000 for 2008 and deemed not in the public interest, Feinberg will try to renegotiate that pay and get some back for taxpayers.
If employees refuse, Feinberg cannot enforce his determinations but he could publicize their lack of cooperation.
Feinberg said his determinations will come in about three months and that the seven original firms under his jurisdiction will get a heightened degree of scrutiny.
He said he will focus on companies that have not yet repaid TARP. If a company has completely repaid the taxpayer with interest, that makes it much easier to conclude by reason of that repayment, acting in a manner consistent with the public interest.
(Reporting by Karey Wutkowski and David Lawder; Editing by Andrea Ricci and Leslie Adler)