Posted on 24 Mar 2010
U.S. pay czar Kenneth Feinberg said Tuesday his $500,000 restriction on cash salaries will cover 82% of the 119 top executives at the five companies he oversees. Five executives at American International Group Inc., one of the five firms, will receive more than that.
He made the announcement as part of his review of 2010 pay packages for the "top 25" executives at the companies, including senior executives and the next 20 most highly compensated employees. Some of those employees have since left the firms, which in addition to AIG include General Motors Co., Chrysler Financial, Chrysler Group LLC and GMAC Inc.
Next month, Mr. Feinberg plans to release compensation restrictions for the 26th to 100th highest-paid employees at the five firms.
Mr. Feinberg didn't give AIG everything it sought. AIG asked that 10 of its top 25 get more than $500,000 cash salary, an exception permitted under Mr. Feinberg's rules for "good cause." Mr. Feinberg agreed to five.
Several AIG executives did appear to see increases in annual cash salary above what Mr. Feinberg set for them late last year, according to an analysis of two reports issued by Mr. Feinberg—in October and on Tuesday—that identify the top earners by employee ID numbers.
Of the eight employees who were part of both the 2009 and 2010 reviews, four saw cash salary jumps of at least $100,000, while the other four stayed flat.
For the eight, overall compensation including cash, stock salary and long-term restricted stock either stayed the same or rose.
In addition, AIG went from having one person in the group Mr. Feinberg reviewed earning cash salary of more than $500,000—Chief Executive Robert Benmosche—to five. Three of those people are making $700,000 a year and one is making $1.5 million. Mr. Benmosche earns $3 million in cash a year.
The bulk of the new entrants to the top 25—12 out of 14—saw their overall cash compensation decrease by $23 million, according to Mr. Feinberg.
For AIG's financial-products group, which made the soured derivatives trades that devastated the company, Mr. Feinberg froze cash compensation at levels dating back to the end of the fiscal year 2008 for five out of six employees he reviewed. One will receive a $450,000 salary "in light of his critical role," Mr. Feinberg said.
In addition, Mr. Feinberg cut off the non-cash component of compensation for AIGFP employees until AIG's compensation committee affirms recouping $45 million of controversial retention payments made last March to employees of this unit.
GMAC Chief Executive Officer Michael Carpenter will only be paid in stock that must be held for the long-term, Mr. Feinberg said.
Mr. Feinberg plans to reduce total executive compensation at AIG, GMAC, and Chrysler Financial by 15%, he said. GM and Chrysler Group aren't included in this total because of bankruptcy restructurings that occurred in mid-2009.
On average, overall cash for the executives are slated to be decreased by 33% from the levels he set in 2009.
Mr. Feinberg's decision comes amid pressure on the Treasury Department over its executive compensation regulations and multimillion-dollar severance pay made to former AIG executives. Sen. Charles Grassley (R., Iowa) on Tuesday requested the special inspector general for the $700 billion Wall Street rescue plan probe Treasury's implementation of executive pay rules, suggesting the department improperly ignored parts of the law passed by Congress that allowed for the payments to be made.
Also, Mr. Grassley asked Special Inspector General Neil Barofsky to probe whether a top Treasury official working on executive pay issues should have been prevented from helping draft Treasury rules because of his previous work at a law firm that included Bank of America Corp. and AIG as clients.
"At a minimum this presents the appearance of serious impropriety," Mr. Grassley wrote in the letter to Mr. Barofsky on Tuesday.