The US government’s pay czar on Wednesday approved executive pay packages at bailed out companies for next year, exceeding government-imposed limits in the case of General Motors (GM).
Kenneth Feinberg, Treasury’s special master on pay, allowed up to US$9.5 million for GMAC’s incoming chief executive and up to US$6.2 million for General Motors’ new financial chief.
Feinberg was appointed in June amid taxpayer outrage that firms getting federal funds were paying top executives exorbitant salaries. He has tried to curb compensation and meet company demands for competitive salaries to attract and keep talent.
In a filing with US securities regulators, GM said the package for new chief financial officer Chris Liddell exceeded limits imposed on companies that received government aid.
Feinberg said GMAC CEO Michael Carpenter and Liddell will only realize those levels of compensation if the companies succeed over the long-term and are able to repay taxpayers. The compensation is largely in long-term stock.
“We have made every effort to tie competitive pay to overall company performance,” Feinberg said.
He also approved US$600,000 annually in salary stock for Chrysler CEO Sergio Marchionne for his service on the Chrysler board of directors, which is also under the pay czar’s jurisdiction. The approval for Marchionne does not include his compensation for his role as CEO, which is paid by Fiat SpA, where Marchionne is also CEO.
Liddell will start at GM on Jan. 1. He received just over US$3.5 million in his previous CFO job at Microsoft last fiscal year — about US$1.1 million in salary and bonus and about US$2.4 million in stock awards.
At Microsoft, Liddell was a key player in a range of initiatives that reflected the company’s transition to a slower growth business.
The totals approved by Feinberg include exceptions to the agency’s compensation rules. For example, Feinberg agreed to a salary of US$750,000 for Liddell, above the US$500,000 limit. Liddell is also allowed US$3.45 million in salary stock and US$2 million in restricted stock grants.
Feinberg approved US$950,000 in salary for GMAC CEO Michael Carpenter and stock salary up to US$5.415 million and restricted stock grants up to US$3.135 million.
“It doesn’t surprise me that they are having to pay substantial amounts of money,” said Todd Gershkowitz, a compensation consultant with Farient Advisors.
He said the incoming executives are entering situations that are not only messy, but risky, making it necessary for the companies to “pay a premium.”
“How Ken Feinberg knows what to do and what he is doing to come up with these approvals, I am very suspect,” Gershkowitz said.
Liddell, seen as a potential successor to GM chairman and acting CEO Ed Whitacre, faces the challenge of steering the top US automaker back to public ownership with an initial public offering expected as early as next year.
GM took over US$50 billion in US government aid and emerged from a bankruptcy directed by the Obama administration in July.
The automaker has said it expects to pay back the first tranche of its US government funding — US$6.7 billion in loans — by June.
GM’s current CFO, Ray Young, will be transferred to the automaker’s international operations based in Shanghai on Feb. 1, the firm said.
Pay curbs imposed by Feinberg sent financial giants Citigroup Inc and Bank of America Corp rushing to exit the bailout program. Both have agreed to pay back their taxpayer bailouts, taking them out of Feinberg’s purview.
Feinberg’s control has caused significant friction with insurer AIG, where top executives, including CEO Robert Benmosche, have reportedly considered quitting because of the pay constraints.
Treasury also said Citigroup, which paid back US$20 billion of bailout money this week, would no longer be subject to the executive pay restrictions next year for receiving “exceptional assistance” from the government. Restrictions are in place for compensation for this year.
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