GM Withholds Executive RSU Bonuses Pending a U.S. Treasury Review - 28 Apr 2009

GM Withholds Executive Bonuses Pending a U.S. Treasury Review

By Miles Weiss

April 28 (Bloomberg) -- General Motors Corp. is suspending
the payment of executive bonuses promised in prior years pending
a government review of the awards.

The U.S. Treasury Department is reviewing bonuses under
terms of a Dec. 31 loan agreement with GM, according to filings
April 24 with the U.S. Securities and Exchange Commission. The
move affects portions of earlier bonuses that vest this year for
mid-level managers as well as top executives, including Chief
Executive Officer Fritz Henderson, the documents show.

Lawmakers criticized Treasury Secretary Timothy Geithner
last month after American International Group Inc., the insurer
taken over by the government that received $173 billion in
bailout funds, said it would make $165 million in what the
company described as contractually required retention payments.

U.S. efforts to prevent such payments have made companies
more wary of bailout programs, said Alan Johnson, managing
director of compensation consultant Johnson Associates Inc.

“We have clients that are terrified,” said Johnson, who
is based in New York. “The precedent is, the government can and
will change the rules at any time retroactively.”

Jenni Engebretsen, a Treasury spokeswoman, declined to
comment immediately.

Treasury officials in December agreed to lend to GM, and
the automaker has now borrowed $15.4 billion to keep from
running out of cash. The Dec. 31 agreement, part of a bailout
plan for GM and rival Chrysler LLC, places limits on
compensation for GM’s 25 most highly paid employees.

‘Their Call’

One such restriction bars GM from accruing or paying out
bonuses without the written approval of Steven Rattner, the
Treasury Department’s chief auto adviser. That may affect
bonuses tied to GM’s stock price that were awarded as far back
as 2006, according to insider reports filed April 24 with the
SEC by 13 GM executives.

“Treasury could decide that since these grants were made
prior to the loan agreement, they should go forward,” said
Julie Gibson, a GM spokeswoman. “But ultimately it’s going to
be their call.”

GM shares declined 23 cents to $1.81 at 4:15 p.m. in New
York Stock Exchange composite trading. The stock has fallen 92
percent in the past 12 months as sales fell.

The review pertains to restricted stock units that GM began
awarding in 2006. GM executives are scheduled to receive these
bonuses -- either in the form of shares or their cash equivalent
-- in annual installments stretching from three to five

For more information on Withholding GMs RSUs.

Posted by Dan Walter

Performensation: Equity Compensation for High Performance Companies.