White House to push for big pay cuts
According to reports, Obama's pay czar will demand 50% decline in compensation,
on average, for top earners at seven firms that received the most bailout funds.
By David Ellis
October 21, 2009
NEW YORK -- The Obama administration will soon order the nation's biggest bailed-out companies to drastically cut pay packages for their top executives, according to several reports published Wednesday.
Kenneth Feinberg, who was named the White House's so-called "pay czar" in June, is expected to demand that the seven largest bailout recipients lower the total compensation for their top 25 highest paid employees by 50%, on average, according to reports in both the New York Times and Wall Street Journal.
For the past two months, Feinberg has been reviewing pay plans at Citigroup (C, Fortune 500), AIG (AIG, Fortune 500), Bank of America (BAC, Fortune 500), General Motors, Chrysler, GMAC and Chrysler Financial in an effort to put these firms in a position to pay back bailout money as soon as possible.
Under the plan, which is expected to be officially released by the Treasury Department next week, annual salaries for executives at those seven firms are expected to fall 90%, on average, according to reports.
Within AIG's controversial Financial Products division, the unit that led to the company's near collapse, no employee is expected to receive more than $200,000 in total compensation.
The Wall Street Journal also reported Feinberg is expected to demand a series of governance changes at the seven firms -- including splitting the role of chief executive officer and chairman.
The Treasury Department had no comment on the reports. AIG, Bank of America, Chrysler Financial and GM also had no comment on the reports. Chrysler, Citigroup and GMAC were not immediately available for comment.
But the moves by Feinberg should not come as a major surprise. Last week, outgoing Bank of America CEO Ken Lewis said he would not accept a salary or bonus for 2009, and the bank said the decision came after Feinberg "suggested" it to Lewis.
Lewis' decision followed an uproar over indications that he is poised to walk away with a minimum of $53 million in pension benefits after he retires.
Lewis' cash salary has been $1.5 million annually since he took over as CEO in 2001. But he actually made $63 million in pay and perks over the past three years, according to filings -- including almost $10 million last year.
Other high-profile CEOs have also taken it upon themselves to act before the government did. Citigroup chief Vikram Pandit, for example, declared earlier this year that he would accept pay of just $1 a year and no bonus until his firm returned to profitability. Just a year ago, Pandit took home $10.8 million in salary, stock and options.
CNN's Miguel Susana, CNNMoney.com's Jennifer Liberto and Fortune's Colin Barr contributed to this report.