The U.S. Treasury’s pay czar, who oversees compensation for the highest-paid employees at the firms that received U.S. taxpayer assistance, said on Thursday that he is concerned that pay cuts could obstruct the ability of these firms to retain and attract top talent. However, the pay czar would be open to requests to hire new executives at competitive industry rates.
The pay czar, Kenneth Feinberg, decides compensation packages for the highest-paid employees at the seven firms that have received substantial support from the Troubled Asset Relief Program (TARP). The pay restrictions were imposed on these firms to enable them to repay government money by controlling excessive pay.
The seven firms, whose top 25 earners received an average 50% lower pay last month by the order of the pay czar, are American International Group (AIG), Citigroup (C), Bank of America (BAC), Chrysler Financial, Chrysler Group LLC, General Motors and GMAC Inc.
Though all seven firms that are subject to such scrutiny have expressed concerns about the impact of pay limits, none of them has appealed to the pay czar.
American International Group’s CEO, Robert Benmosche, had expressed concerns over the compensation restrictions and was considering stepping down, according to the recent media reports. However, Benmosche said on Wednesday to the employees that he plans to stay on. According to Benmosche, the pay restriction on highest-earning employees will make it difficult for the company to repay the taxpayer bailouts as it will be difficult to retain key personnel.
On the other hand, the move could be very sensitive for Bank of America, which is searching for a new CEO to replace Ken Lewis.
However, the pay czar said that he would measure his success in determining appropriate pay levels for the bailout-out firms by their repayment of taxpayer money.
Some large financial firms that have already repaid government funds are JPMorgan Chase & Company (JPM), Morgan Stanley (MS), Bank of New York Mellon Corporation (BK), Goldman Sachs (GS), U.S. Bancorp (USB), American Express Company (AXP), BB&T Corporation (BBT) and State Street Corporation (STT). However, for many other firms, the full repayment of TARP money is unlikely for a long time, as they face very difficult situations.
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