When “pay czar” Kenneth Feinberg appeared before the House Oversight and Government Reform Committee on Wednesday, most members seemed quite pleased with his work.
And why wouldn’t they be?
Feinberg, after all, had just slashed cash compensation by 90 percent, and total compensation by 50 percent, for the top twenty-five executives at each of the seven companies under his purview–the seven lemons the American people now own post-bailout–AIG, Bank of America, Chrysler Financial, Chrysler Group LLC, Citigroup, GM, and GMAC.
For politicians whose constituents want, if not blood, then at least some measure of revenge against the bailed-out fat cats, Feinberg’s work is a gift.
But it quickly became clear that whatever impact Feinberg’s decisions might have on these seven companies, executive excess on Wall Street–which Missouri Democratic Congressman William Lacy Clay pointed out has resulted in CEOs making more than 400 times the average worker’s pay, an all-time high–will not be impacted.
Even the initial pay proposals submitted by the seven companies–which one might think would show remorse and responsibility–were very telling.
“The general conclusions I reached after careful evaluation and analysis of the submissions were the same for six of the seven companies,” said Feinberg. “Each submission would result in payments contrary to the ‘Public Interest Standard,’ and should, therefore, be rejected.”
Feinberg said the problems with the proposals included “excessive guaranteed cash–salaries and bonuses”; stock that was “immediately redeemable or redeemable without a sufficient waiting period”; too much compensation that wasn’t tied to “performance-based benchmarks”; too many “perks,” like use of a private jet, country club dues, golf trips, etc.; and insufficient effort to fold contracts that were signed previous to the TARP restrictions “into 2009 performance-based compensation.”
In short, the same old, same old.
So Feinberg got to work slashing. The exorbitant cash guarantees were for the most part converted into “stock salary,” one-third of which would be annually redeemable after two, three and four years, and some money withheld until all TARP funds are repaid. Perks were limited to a mere $25,000 per individual–cry me a river–with any greater amount requiring Feinberg’s approval. In the three cases where individuals didn’t agree to renegotiate their pre-TARP pay packages–and, you guessed it, they were employees of AIG–Feinberg said he let them know that would affect 2009 compensation determinations.
“We’re very persuasive,” said Feinberg with a chuckle.
Feinberg took issue with a widely reported Wall Street Journal story that he had “actually raised cash-based salaries.” He said the story cited an instance when he raised an executive’s base salary to $475,000–but the article failed to mention that the same individual had taken home a total of $13 million in cash from Citigroup last year. Feinberg insisted that where base salaries were raised, guaranteed cash was dramatically reduced in the overall pay package.