The administration of US President Barack Obama has opted to slash executive salaries at firms rescued by taxpayer bailouts, cutting cash payments by 90 percent amid a public backlash at bloated Wall Street bonuses.
In a dramatic swipe at big business as unemployment nears 10 percent and the economic crisis reaps a painful toll, Obama’s corporate pay czar also hacked away at corporate perks and “golden handshake” payoffs.
The US Federal Reserve meanwhile fired its own shot at the corporate gravy train, unveiling new rules to curb pay awards at top banks that encourage excessive risk-taking that imperils the wider financial system.
Treasury official Kenneth Feinberg cut cash payouts to the 25 top executives of seven bailed out firms by an average of 90 percent, capping salaries at US$500,000 for most and reducing total compensation by an average of 50 percent.
Obama said Feinberg had taken “an important step forward” in curbing financial excess.
“We don’t disparage wealth, we don’t begrudge anybody for doing well, we believe in success,” he said.
“But it does offend our values when executives of big financial firms — firms that are struggling — pay themselves huge bonuses, even as they continue to rely on taxpayer assistance to stay afloat,” Obama said.
The restrictions apply to firms that took the most money from the US$700 billion Troubled Asset Relief Program set up by the administration of former US president George W. Bush last year to stave off a complete financial meltdown.
Those affected include AIG, Bank of America, Chrysler, Chrysler Financial, Citigroup, General Motors and GMAC.
Public anger began to boil over when it was revealed earlier this year that disgraced insurance giant AIG was still paying US$165 million in bonuses despite the huge cash injections by Washington.
Feinberg’s measures are designed to reward long-term success of executives who build firms rather than seek get-rich-quick profits and turn existing cash guarantees held by executives into long-term stocks.
Critics have complained at government interference in the free market and warned that the pay cuts may see struggling firms lose executive talent to competitors not subject to pay curbs.
Feinberg brushed aside those fears, saying he thought the “right balance” had been struck with the new salary limits.
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