The Obama administration last night named Kenneth Feinberg, the lawyer who oversaw the government's compensation fund for victims of the September 11th, 2001, attacks, as its ‘pay czar’ to police compensation of top earners at companies receiving “exceptional” government aid.
It also urged new laws to give shareholders more say on how executive salaries are set and put in place rules to govern pay at companies getting taxpayer aid, part of a multi-pronged effort to curb practices it says led to the financial crisis.
The pay packets of top executives, which sometimes are equal to several hundred times the pay of average employees, ignited a storm of controversy after the US Treasury rescued banks and other companies from the brink of collapse by pumping in billions in taxpayer dollars.
Under the new rules, Feinberg would have broad control over pay for top executives of the seven firms deemed to be receiving exceptional assistance - General Motors, Citigroup, Bank of America, Chrysler, AIG, GMAC and Chrysler Financial.
The rules implement congressional restrictions on bonuses for senior executives and other top earners at companies that receive government bailouts.
At the firms receiving exceptional assistance (each of which has received more than $500 million in aid) Feinberg would be able to reject pay packages for the five most senior executives at each firm.
He would also have the power to reject the next 20 most highly paid employees if he finds the compensation excessive.
Many banks have chafed at curbs on pay that accompanied the capital injections they received from the government - restrictions that 10 top US banks will be free of after winning clearance Tuesday to repay bailout money.
Feinberg's decisions are to be guided by a set of principles that weigh the risks being taken by executives, the potential return for taxpayers, how pay is allocated between salary and other forms of compensation, comparable pay at other firms and whether pay is calculated to improve performance.
Separately, US Treasury Secretary Timothy Geithner urged Congress to give the Securities and Exchange Commission new powers to affect how executive pay scales are set.
Reuters