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The Obama administration’s pay czar Tuesday slashed pay again at five U.S. firms that still depend on a government lifeline, but boasted that the clampdowns are not sending talented workers fleeing for the exits.
Kenneth Feinberg, a Washington lawyer who was appointed last year to oversee pay at firms receiving taxpayer bailouts, cut 2010 pay for the highest-paid employees at those firms on average by 15 percent, compared to 2009. Cash pay was cut 33 percent on average, the Treasury Department said.
The firms are AIG, General Motors, GMAC, Chrysler and Chrysler Financial.
The Treasury, where Feinberg’s office is housed, also 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.”
The Treasury touted that statistic as evidence that Feinberg is striking the delicate balance at trying to soothe public anger over high paychecks underwritten by the taxpayer, while also trying to keep key talent at these firms.
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 Troubled Asset Relief Program (TARP) 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 insurer’s near-collapse were still receiving multi-million-dollar retention bonuses.
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’s rulings on Tuesday largely follow the formula he laid out for 2009 pay at the then-seven firms under his jurisdiction. Bank of America and Citigroup have since repaid all or some government assistance, getting them out from under Feinberg’s authority.
For his 2009 pay rulings, which applied to the last few weeks of the year, Feinberg slashed overall pay by 50 percent and cash pay by 90 percent.
Feinberg 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.
Further, Feinberg pointed out that the chief executive of auto finance company GMAC is receiving no cash salary, only long-term stock.
The CEO at Chrysler Group LLC, Sergio Marchionne, who also runs Italian carmaker Fiat SpA , is drawing no salary from Chrysler again this year, and Feinberg approved the Detroit company’s request to keep its top 25 cash salaries flat with 2009.
At General Motors Co, cash salaries for returning top-25 executives are due to fall 14.2 percent from last year. Including CEO Edward Whitacre and other executives new to the top 25, cash salaries are down only 7.5 percent.
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 such as Goldman Sachs and JPMorgan Chase, asking to “look back” at past pay.
Feinberg wants to comb through the data 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 the funds.
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 say no, Feinberg cannot enforce his determinations but he can publicize their lack of cooperation.
Some firms have used Feinberg’s position to provide cover on their pay packages, including Goldman Sachs who reached out to Feinberg for advice on their compensation.
Goldman, which has repaid $10 billion in TARP funds, announced that its top managers in 2009 would be paid no cash, all-stock bonuses, and surprisingly capped its compensation pool at $16.2 billion for the year — well short of the $20 billion record set in 2007.
(Reporting by Karey Wutkowski and David Lawder; Editing by Andrea Ricci)