Feds to slash salaries of bailout execs
|October 22, 2009||http://detnews.com/article/20091022/BIZ/910220449|
Feds to slash salaries of bailout execs
GM, Chrysler among firms to cut pay for top 25 managers
Detroit News Washington Bureau
Washington — The Obama administration will slash the pay of top executives at seven firms that received government bailouts — including General Motors Co., Chrysler Group LLC, Chrysler Financial LLC and GMAC Inc.
All told, the 25 highest-paid executives at each company — the list also includes American International Group, Bank of America and Citigroup Inc. — will see total compensation fall by an average of 50 percent, two government officials said. Cash salaries of those executives will drop 90 percent on average.
Those averages are skewed somewhat by huge pay cuts for some financial industry executives, including in AIG’s troubled financial products unit.
Top earners at GM and Chrysler, which have received $62 billion in government loans, are expected to see smaller compensation cuts because they have lower salaries on average than at the financial institutions, officials said. The auto executives already have seen big compensation cuts as a result of the GM and Chrysler bankruptcies. GM executives lost most of the value of equity and stock options they held before bankruptcy.
Executives at both companies also have seen the value of their pensions reduced and faced other benefit cuts.
Treasury Department special master Kenneth Feinberg has been reviewing the compensation of the highest paid executives at companies that received money from the Troubled Asset Relief Program. The final agreements with the companies are expected to be unveiled in coming days.
Feinberg also will require changes in the corporate governance at the seven companies, including splitting the positions of chairman and chief executive officer — a move that has already taken place at GM and Chrysler. He will require companies to get permission to grant individual executives more than $25,000 a year in perks.
GM and Chrysler already have stopped using private planes and slashed perks for executives.
GM CEO Fritz Henderson accepted a 30 percent pay cut as chief operating officer in 2008 to $1.26 million. He received no raise after getting the top job at GM in March.
Feinberg is expected to require that a chunk of GM and Chrysler senior executives’ compensation come in the form of a financial instrument that would track the value of the company’s stock — even though it isn’t yet publicly traded.
In June, the Treasury Department imposed a number of restrictions on automakers and financial institutions that received government loans under the $700 billion TARP program. Citigroup, Bank of America and AIG expected to see their pay and benefits cut much more than the automakers, government officials said. The seven firms have received $300 billion in total bailout money.
In mid-August, the seven companies filed their 2009 pay plans for executives.
The Wall Street Journal reported that Citi had sought permission to pay its top execs about $250 million, while Bank of America sought permission to pay about $175 million. The automakers sought permission to pay far less, officials said, but the actual amount hasn’t been disclosed.
GMAC, which sought permission to pay its top 25 executives about $73 million in total compensation and has received about $13.5 billion in government support, said it was still working with the Treasury Department. Most of the compensation would be in stock, not cash.
"We have been working on a proposal that aims at embodying the principles set forth for compensation along with balancing the need to retain critical talent necessary to execute our turnaround," spokeswoman Gina Proia said.
GM spokesman Greg Martin said the automaker was still talking with the Treasury Department.
"We are in ongoing discussions with Mr. Feinberg regarding executive compensation and until those discussions are complete we have no additional information or comment at this time," he said.
Chrysler Group officials said the company has worked closely with Feinberg "while developing the 2009 compensation plan for our 25 highest paid executives."
"Our initial submission was developed in a manner both consistent with our traditional compensation practices and responsive to the current financial position of the company," the company said in a statement.
Chrysler Financial declined comment.