Treasury Announces 2010 Guidelines for TARP Executive Pay
Five big companies are still getting "exceptional support" from TARP (Troubled Asset Relief Program).
The government, represented by Kenneth Feinberg, the "TARP Pay Czar," is trying to rein in the top executive pay at General Motors, GMAC, Chrysler, Chrysler Financial and AIG, partially in response to the public outrage at the excessive salaries that were awarded to these failing company executives in 2009 using TARP bail-out money. Theoretically, the executive pay regulation objective is to have top level compensation hinge on performance and company profitability.
Last month Feinberg announced that the "cash" salaries of the top 25 executives at these five companies would have to be cut by 15%. That decrease sounds pretty good except for the fact that the top executives are still likely to make millions of dollars when you include "non-cash" compensation such as stock options and bonuses.
On Friday, the Treasury announced pay restrictions for the next tier of employees at the five companies, the top 26-100 executives. According to Feinberg, now only the top five executives at this level will be making more than $500,000 cash salary, which is down from sixty-plus executives per company who were allowed in excess of $500,000 cash salary in 2009.
The pay regulations began in October 2009, affecting seven companies. At that time Bank of America and Citigroup were also receiving a large amount of TARP money, but they have since paid it back. Bank of America and Citigroup do not have to adhere to these new pay restrictions.
Just as an aside, Bank of America recently announced a first quarter 2010 profit of $3.2 billion dollars, largely due to investment banking activity. They also hired a new CFO, Charles Noski, giving him a $500,000 signing bonus, $800,000 salary, relocation assistance and up to $7.2 million in performance-related incentives.Continued on the next page