Excessive executive compensation has taken center stage since the government’s bailout of banks began. Americans expressed outrage as CEOs and other executives responsible for the financial crisis pocketed millions from bonuses to Golden Parachutes. In 2008, CEO perks alone amounted to an average of $364,041 - or nearly 10 times a full-time worker’s the median pay. The economy tanked for those workers, but many companies were bailed out with more than $700 billion in taxpayer money, as well as low-interest loans and guarantees.
In a display of Obama administration “kicking butt and taking names” Pay Czar Kenneth Feinberg recently slashed executive pay at companies that still depend on government funds. A once-prestigious roster of corporate titans like American International Group (AIG), Citibank, Chrysler, Chrysler Financial, General Motors and GMAC got slammed by Feinberg. Kenneth Feinberg is a lawyer appointed by President Obama to oversee pay at firms receiving "exceptional assistance" from the government's $700 billion Troubled Asset Relief Program (TARP) and have not yet substantially repaid the funds.
To Corporate America Obama said, "This is America, we don't disparage wealth. We don't begrudge anybody for doing well. We believe in success. But it does offend our values when executives of big financial firms that are struggling pay themselves huge bonuses even as they rely on extraordinary assistance to stay afloat." To soothe angry Americans’ backlash to the bailouts, Obama’s administration issued guidelines limiting salary for top executives at some firms receiving TARP funds and requiring that additional pay be in the form of restricted stock, vesting only after the company repays its debt, with interest, to the government. Congress then added rules curbing bonuses for top earners at TARP-funded firms and barred those firms from paying bonuses that equal more than a third of their total compensation.
The pay cut affects around 120 top executives of the six companies. But, at the end of the workday all the executives whose pay was affected can still live large. AIG Chief Executive Robert Benmosche's previous $10.5 million annual pay package has been cut to $3 million. Feinberg approved $9 million in compensation for GM Chairman and CEO Edward Whitacre Jr., including $1.7 million in cash; and $6.27 million for new chief financial officer Chris Liddell, including $900,000 in cash. At the GMAC lending company, the new CEO, Michael Carpenter, will receive $8 million -all in stock.
At Chrysler Group LLC just one employee among the top 25 executives is getting overall compensation of more than $1 million: $1.02 million. None of the Chrysler executives is earning more than $500,000 in cash, and just one is getting $500,000 in cash. At Chrysler Financial direct compensation will increase by 10 percent. Only eight Chrysler Financial executives will make more than $500,000 in cash. Feinberg reiterated that Chrysler Financial is shutting down and therefore must pay all of the compensation in cash because the company is to shut down by the end of 2011. An African American, Darryl R. Jackson, headed the company.
Bank of America and Citigroup and have repaid all or some government assistance, getting them out from under Feinberg's authority. In the case of Citigroup, it turned out to be a good investment for the government. The Obama administration is in final preparations to sell its 27 percent stake expecting to net more than $7.5 billion, by far the largest profit returned from any firm that accepted bailout funds.
The mantra of most of the companies was that such salary slashing puts them “in jeopardy of losing top talent to competitors”. If they stay in place; or move to firms not affected by government oversight; these executives will still land in some pretty high cotton.
(William Reed – www.BlackPressInternational.com)