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Obama 'pay tsar' to order deep cuts

Matter-Eater Lad

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I agree, they're part of the government for taking a large sum of government money to stay afloat.


Obama 'pay tsar' to order deep cuts


By Tom Braithwaite in Washington, Bernard Simon in,Toronto and Saskia Scholtes and Greg Farrell in New York


Published: October 22 2009 03:00 | Last updated: October 22 2009 03:00


The top 25 executives at the seven US companies bailed out by the government face a dramatic cut in their cash pay.


Kenneth Feinberg, the Obama administration's "pay tsar", is set to unveil drastic curbs for those whose pay plans he can overrule.


Top executives at Citigroup, Bank of America, AIG, General Motors, GMAC, Chrysler and Chrysler Financial will see an average cut of 90 per cent in the cash part of their 2009 pay packages compared with last year.


Mr Feinberg zeroed in on cash payments, according to people familiar with the deliberations, pushing companies to reduce the salaries of their top 25 executives but allowing some of the reduction to be made up with stock that vests over several years. Overall packages will fall by about 50 per cent.


Under the plan, to be announced in the next few days, Mr Feinberg will demand that companies seek government approval if they want to spend more than $25,000 on "luxury" items such as private jet travel.


At the financial products unit of AIG, the insurance group, which has received most government support, no executive under Mr Feinberg's jurisdiction will receive more than $200,000 in overall compensation. "When it comes to these bonuses and excessive compensation, President [barack] Obama and Congress agree: enough is enough," said Nancy Pelosi, speaker of the House of Representatives.


Mr Feinberg, whose official title is "special master" for executive pay and who was appointed in June by Mr Obama and Tim Geithner, Treasury secretary, has riled some of the companies and concerned some in government with his tough stance on compensation. His critics argue it could lead to the loss of important executives and a decrease in value of the government's stakes.


But amid renewed public anger over Wall Street pay, even leading Republicans were reluctant to criticise government involvement in private company salaries. Instead, they directed their attacks at the troubled asset relief programme, which channelled public money to floundering financial groups and carmakers.


"The bigger issue here is that the Obama administration needs to develop an exit strategy to get the government out of the bail-out business once and for all," said John Boehner, Republican leader in the House of Representatives.


Nell Minow, of The Corporate Library, a supporter of boardroom reform, said Mr Feinberg's actions "may not have any effect at all" on broader pay issues. She said they could encourage companies to pay back Tarp funds, which "might be more beneficial to the taxpayers than the shareholders".


AIG, BofA, Citi, GM and Chrysler declined to comment.


Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.TE]



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