Feinberg Rules On Compensation For Top 25 Of 7 Firms

US GOVTS: Feinberg Rules On Compensation For Top 25 Of 7 Firms
10.22.09, 04:15 PM EDT



Washington, Oct 22 2009 (IFR) - Special Master for TARP Executive Compensation Kenneth Feinberg today ruled on compensation packages for the top 25 highest paid executives at seven firms receiving exceptional TARP assistance, marking a fundamental shift in the pay practices of corporate America.

According to Feinberg's ruling, the top paid employees at AIG ( AIG - news - people ), Citigroup ( C - news - people ), Bank of America ( BAC - news - people ), Chrysler, GM, GMAC ( GJM - news - people ) and Chrysler Financial will receive most of their compensation in the form of company stock that must be held for the long term. Cash compensation will be reduced by more than 90 percent, limiting salaries to $500,000 for more than 90% of relevant employees. Base salaries of more than $1 million were approved in just three cases: for the new CEO of AIG and for two employees of Chrysler Financial.

Even when including the value of stock, the rulings effectively reduce total compensation packages to less than half of 2008 levels. In GMAC's case, total direct compensation will be reduced by 86%. For Citigroup, total compensation will by cut by 70%. In Bank of America's case, total compensation will be cut by 62% and for AIG employees, by 58%. Despite these variations, Feinberg said the same methodology was used for all seven firms.

Not only do the rulings alter the type and amount of payment received, but they also place significant restrictions on that pay. Specifically, stock paid as salary will be restricted until TARP funds are repaid and will only be dispensed if the employee works at the company for at least three years after the award is made. Incentive payments will only be awarded to those employees that achieve predetermined performance goals certified by each company's independent compensation committee. Unlike the pay practices of the past, stock may only be sold in one-third annual installments beginning in 2011, unless the TARP funds are fully repaid earlier.

more...

http://www.forbes.com/feeds/afx/2009/10/22/afx7033472.html

...in the right direction. Still, Goldman Sachs and several other of the most egregious players are exempted from this ruling, and only the top 25 execs are included. ANY salary over one million ought to be taxed at 90% IMO.