Pay czar to order massive executive pay cuts at US bailout beneficiary firms
22 Oct 2009
Employees at US firms that received huge sums of government aid will see their pay cut in half. Around 175 employees will come under the purview of the pay czar's order with the vast majority of salaries coming in under $500,000, according to sources familiar with the plans.
As expected, salaries will bear the biggest hit, which will drop by 90 per cent on an average. Additionally, Kenneth Feinberg, the treasury department's special master for compensation, also wants to introduce a number of corporate governance changes at the firms.
Feinberg is expected to announce his ruling in a few days, which will likely provide fodder for the long-running debate about whether the Obama administration is being overly tough or overly lenient on Wall Street.
According to an executive at one of the seven companies under Feinberg's purview, the terms came as a shock and the restrictions on compensation were clearly much worse than what had been anticipated.
The largest individual compensation will be less than $10 million for a Bank of America Corp employee, according to source close the development. This is much less than what star employees at Wall Street take home as standard payouts.
Yet some executives will still take home large paychecks with some big salary cuts skewing the overall numbers. Outgoing Bank of America chief executive Kenneth Lewis will receive no salary for 2009 while Citigroup Inc is telling employees the net impact of Feinberg's rulings would likely be minimal as the cut salary would be shifted from cash to longer term stock grants, according to source close to the matter.
