The US pay czar on Friday expanded a crackdown on pay packages at four companies rescued with taxpayer money, limiting most cash salaries at US$500,000 for a second tier of top earners.
The US Treasury Department’s Kenneth Feinberg issued the new limits amid outcries from some companies on a government lifeline that they cannot retain or attract key employees, sending the firms racing for a bailout exit.
He set the compensation structures for the 26th through 100th highest-paid employees at four firms: Citigroup Inc, American International Group Inc, General Motors Co and GMAC.
Chrysler and Chrysler Financial were exempted during this round of rulings because total pay for their second-tier executives is already under US$500,000.
Feinberg, a Washington lawyer appointed by US President Barack Obama in June after public anger exploded over high pay at bailout firms, said he granted less than a dozen special exemptions from the cash salary cap.
“In a very few cases, we did recognize there was an individual who, based on company input, was deemed to be truly essential,” he told reporters.
Those exempted from the new pay caps included several at insurer AIG. The exempted executives were not identified and generally were allowed cash pay up to US$950,000, although one was granted US$1.5 million, he said.
Feinberg, in his latest rulings, also targeted bonus pay.
He insisted that incentive pay be limited to a “fixed pool” of funds to be negotiated with Feinberg, which would require companies to carefully choose who to reward.
“There cannot be runaway bonuses,” Feinberg said.
All incentive pay can be clawed back if results prove illusory.
When asked by reporters about GM, which is scrambling to find a new chief executive who can retool the giant automaker, Feinberg indicated the firm may get a break. He said he was willing to take a “fresh look” at proposed pay for GM’s new CEO, adding it was “vital” that GM, majority owned by the government, be competitive.
The UK this week slapped a 50 percent tax on bank bonuses and France is considering a similar move. On Thursday, Goldman Sachs — which already repaid its bailout funds — announced its top executives will not receive cash bonuses for this year.
Feinberg lauded Goldman’s compensation changes, which also mandated that managers receive all discretionary pay in stock that must be held for five years and is subject to a clawback provision.
“That is precisely the type of impact that we at Treasury and the administration are hoping to have,” he said.
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