Pay Czar Increased Base Pay at Firms

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Mr. Feinberg oversees seven firms that accepted bailout packages: American International Group Inc., Citigroup Inc., Bank of America Corp., General Motors Corp., GMAC Financial Services, Chrysler Group and Chrysler Financial. The Treasury Department assigned him the job of tying more compensation at the companies to long-term performance and cutting pay deemed "excessive." .....Officials with some of the companies confirm they urged Mr. Feinberg to boost base salaries, complaining that his proposed restrictions would deprive their employees of needed cash. Others said they wanted higher base salaries to prevent key employees from leaving.

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Some pay experts said they were surprised to learn that Mr. Feinberg boosted employees' base salaries, based on his prior public comments. Some also said the move appears to contradict his effort to change how salaries were paid. Government officials and others have argued that pay packages based around short-term incentives or guaranteed payments helped cause the financial crisis.

"I don't think it's a good thing," said Russell Miller, managing director with ClearBridge Compensation Group LLC in New York. "Politically, it's odd. In terms of messaging, it's odd. From a business perspective, I prefer to align compensation with performance objectives and not a fixed rate."

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The Treasury said last week it cut "average cash compensation" for the companies under Mr. Feinberg's control by more than 90% compared with 2008. That category covers a range of payments to employees including base salaries, a share of company profits, commissions, retention payments and other guaranteed cash payouts. Not included in that number is stock grants. .....
In press events and public speeches leading up to Mr. Feinberg's decision, government officials said compensation would take a hit, without making distinctions between different types of pay.

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Paul Hodgson, senior research associate at Corporate Library, a governance research group in Portland, Maine, said he thought Mr. Feinberg "was taking their actual base cash salaries and reducing them by 90%," based on similar comments made by the pay czar. Mr. Feinberg instead meant the range of payments made to employees, including base pay, bonuses and other incentive payouts.
Mr. Hodgson said he was "flabbergasted" to learn of the boosts to base pay. "It's inconsistent with his broader mission" of tying pay to long-term performance, he said.

Mr. Feinberg's review will be a focus on Capitol Hill on Wednesday, when the pay czar testifies before the House Government and Oversight Committee.

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