Pay Czar Puts $500K Limit on Executive Compensation

(CBS)

White
House pay czar Ken Feinberg announced Friday the second round of rules
governing executive compensation for bailed out companies, generally
limiting pay to $500,000 for affected employees, reports CBS News White House correspondent Mark Knoller.


The rules cover the 26th through 100th top-paid employees at firms
who received exceptional assistance from the Troubled Asset Relief
Program – AIG, Citigroup, GM and GMAC.


Feinberg unveiled rules for the 25 top-paid employees in October.


Under the rules, cash salaries would be generally limited to
$500,000 a year. According to the Associated Press, there will be about
12 exemptions granted to executives so their companies will be able to
"thrive, be able to compete, and not lose key people," Feinberg said.


Under the exemptions, one person will receive a $1.5 million
salary. The remaining 11 will earn between $500,000 and $950,000.
Feinberg did not identify those employees, or their companies, but
acknowledged AIG is one of the companies given an exemption. AIG
received more than $180 billion in government funds and came under
intense scrutiny for issuing lavish bonuses earlier this year.


Chrysler and Chrysler Financial are subject to government oversight
of compensation, but no employees surpass the $500,000 salary
threshold.



Bank of America is no longer subject to federal restrictions after they repaid $45 billion in bailout funds this week.


Incentives will be paid only for "real performance," Knoller
reports. The total cash component can't exceed 45 percent, and at least
half the package must consist in "long term" compensation – such as
stock – that must be held for at least three years.



The restrictions are in part designed to discourage the kind of reckless risk taking that led to the financial crisis:



"I think its completely fair that they should try and figure out a
way to reduce the risk in the system to that we don't go through the
agony of the past 12 months," banking industry analyst Dick Bove told CBS News.



Fringe benefits, such as private jet use, will be limited to $25,000 a year.


The new rules are in effect for the second half of December and don't impact employees who have already been paid this year.


The individual firms will implement the new standards and future
exemptions will be decided by independent compensation committees at
each company. Feinberg will continue to oversee the system.


Bonuses at U.S. banks are expected to soar by 40 percent this year.
Bowing to a storm of criticism, Goldman Sachs, which has set aside more
than $16 billion for compensation, said Thursday it will not pay cash bonuses to its 30 top executives, but instead will award them stock that cannot be sold for five years.