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Chiefs' Salaries for AIG, Ally, and GM Put On Freeze

Source: WSJ

Posted on 09 Apr 2012

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Overall pay will remain frozen again this year for chief executives of American International Group Inc., General Motors Co., and Ally Financial Inc., three firms that haven't repaid all their government bailouts, the Treasury Department said on Friday.

Treasury gained power in 2009 to approve executive compensation at firms that received exceptional federal assistance, following public outrage at big bonuses paid at AIG after the financial crisis bailouts. CEOs at AIG, GM and Ally didn't request pay increases this year, people familiar with the matter said.

Total compensation for the top 69 executives at the three companies fell 10% from 2011, with some getting more and some getting less, the government said. In part, the decrease reflects the departures of some higher-paid executives.

All but one of AIG's top 25 executives was projected to earn more than $2.3 million in 2012, and nine of those will earn at least $5 million. The government said its goal in reviewing the pay packages is to ensure that pay doesn't exceed what is offered at comparable firms.

The U.S. still has $36 billion invested in AIG, $26 billion invested in GM, and $12 billion invested in Ally, part of the $700 billion Troubled Asset Relief Program created in 2008 at the height of the financial panic.
Hundreds of banks and other companies received taxpayer-funded bailouts after the TARP was created. Many have repaid the money.

Debate over the bailouts remains heated, and the still-controversial actions taken by the Bush and Obama administrations during the crisis have became a flashpoint during the Republican presidential primary.

Robert Benmosche, CEO of New York-based AIG, will continue to be paid up to $10.5 million in cash and stock in 2012. His pay was set when he joined the insurer in August 2009. The government still owns a 70% stake in the insurer, and plans to sell that over time.

AIG is a smaller company after selling some overseas life insurers to repay part of its bailout. The insurer reported operating income of $1.8 billion for 2011, versus an $898 million loss the previous year. The U.S. began exiting AIG last year by selling part of its majority stake after the company repaid its debt to the Federal Reserve Bank of New York. AIG's main businesses now include a global property and casualty insurer and a domestic life insurer.
AIG declined to comment.

GM CEO Dan Akerson's 2012 pay package is worth about $9 million in cash and stock. He has been a vocal critic of the pay restrictions, arguing they should be lifted because the U.S. is no longer GM's majority owner.

"We sold half the government position in the company. There ought to be a new perspective," Mr. Akerson said in late 2010, before making an unsuccessful appeal to have last year's pay limits eased.

He has argued that the limits hurt GM's ability to attract outside executives and put the company at risk of losing valuable executives to rivals. So far, the company has said, no one crucial to its operations has left as a result of the restrictions.

"The pay restrictions make our jobs a lot harder when it comes to recruiting and retaining the best talent in the business," GM spokesman Jim Cain said on Friday.

The Detroit auto maker earned $7.59 billion in 2011, a 62% increase from the prior year, and the biggest profit in its 103-year history on the strength of its once-unprofitable North American business. Sales in its two biggest markets, China and the U.S., continue to expand. Chinese volume rose 12% and the U.S. 11%, both in March.

Michael Carpenter of Ally Financial, $9.5 million in stock

Ally Financial CEO Michael Carpenter's 2012 pay will remain at $9.5 million in stock, slightly less than the $9.93 million in shares that he collected in 2010. He has led the auto lender since November 2009.

Detroit-based Ally, which provides financing to GM and Chrysler Group LLC dealers and their customers, is 74% owned by the U.S. government. It lost $201 million in 2011, compared with a $1.1 billion profit the year before, largely because of its exposure to mortgage liabilities stemming from a foray into subprime real estate.

Ally failed the Federal Reserve's most recent "stress test" of how well it would weather a hypothetical financial crisis. Its mortgage-lending unit, Residential Capital LLC, is expected to seek bankruptcy protection this year on the way to a possible court-supervised sale, said people familiar with the situation.

Ally said in a statement Friday that its "executive compensation continues to be in line with the stated guidelines for TARP companies and the management team is squarely focused on delivering value for shareholders and repaying the remaining U.S. Treasury investment."

Mr. Carpenter, Ally's CEO, earlier this year called the federal pay restrictions on his employees "severe" and "bizarre."

Treasury has pushed the companies to redesign their pay packages so that more compensation is awarded in stock and less in cash bonuses based on short-term results.

Treasury this year also rejected some salary increases requested by GM.

"After reviewing GM's proposal, the Office of the Special Master has determined that in certain cases the full amount of the proposed increases was not justified," Patricia Geoghegan, the Treasury official responsible for reviewing and approving the companies' pay proposals, said in an April 6 letter to GM.

Her letters to the companies don't detail what was requested or how much any individual pay package was altered.