Audit rips exec pay in bailouts
January 25, 2012
Audit rips exec pay in bailouts
Fed report criticizes Treasury for allowing $500K-plus salaries
By DAVID SHEPARDSON / Detroit News Washington Bureau
Washington— An audit released Tuesday criticized the U.S. Treasury Department’s decision to allow firms that got large government bailouts to pay some executives cash salaries of more than $500,000 to keep them from quitting.
In 2009, the Treasury Department imposed pay restrictions on seven bailout recipients under the 2008 $700 billion Troubled Asset Relief Program: General Motors Co., Chrysler Group LLC, Ally Financial Inc., AIG, Bank of America Corp., Chrysler Financial Services Inc. and Citigroup.
The report by the Treasury Department’s special inspector general overseeing TARP criticized the decision to allow some executives to receive big cash salaries.
The first pay czar, Ken Feinberg, said “companies pressured him to let the companies pay executives enough to keep them from quitting, and that Treasury officials pressured him to let the companies pay executives enough to keep the companies competitive and on track to repay TARP funds,” according to the report.
It also criticized companies for seeking to pay big salaries.
“The TARP companies failed to take into account the exceptional situation they had gotten themselves into that necessitated taxpayer bailout,” the report said.
The report noted that 10 employees in 2009, and 22 employees in 2010 and 2011 — at GM, Chrysler Financial, Ally and AIG — received cash salaries of more than $500,000. In February 2009, President Barack Obama announced a $500,000 cap on cash salaries for executives at those companies, but that announcement did not have the force of law.
Today, only GM, Ally Financial and AIG are still under the government’s pay restrictions.
The Treasury Department’s pay czar defended the office’s performance, noting that average cash compensation for the 25 top executives at the companies was cut by more than 90 percent — and total compensation for the top 25 was cut by more than 50 percent.
“The facts clearly demonstrate that (the pay czar) has succeeded in achieving its mission,” said Patricia Geoghegan, acting pay czar.
GM Chairman and CEO Dan Akerson, who makes $9 million annually in total compensation, including $1.7 million in cash, told a Canadian reporter this month that the special master’s office had offered to let him make more money.
“I’m probably in the bottom 10 percent of CEOs,” Akerson told CTV. “The government actually wanted to give me a raise, but I said, ‘I can’t do that.'”
GM declined to comment Tuesday on the audit or address Akerson’s comments.
GM told the auditors that the company would end the pay limits as soon as the Detroit automaker is freed from oversight.
The audit said it found the czar had approved nine GM pay packages in 2010 that contained cash salaries of more than $500,000. In 2011, the czar approved cash salaries of more than $500,000 for 11, or 44 percent of GM’s top 25 employees.
An unnamed GM executive told the auditors that some candidates for chief financial officer would not interview at GM.
“A GM executive told (auditors) that the drama surrounding executive compensation — with citizens protesting at the homes of executives from companies that received government assistance, such as AIG — is one reason that some people did not apply for jobs at GM,” the report said.
The Treasury Department, which still owns 26.5 percent of GM as part of a $49.5 billion bailout, has said GM won’t be released from the pay limits until the government sells its remaining shares.