Treasury: bailed-out firms to slash pay in Nov.

October 22, 2009 12:33:41 PM PDT
The Treasury Department on Thursday ordered seven companies that received billions of dollars in government bailouts to halve total compensation for their top executives. But the big reductions will not apply to pay earned before November. Kenneth Feinberg, the Treasury official leading the pay review, told reporters that average salaries for the top 25 executives are being cut 90 percent starting next month.

The action will apply to the top executives at Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial.

The government did not want to make executives return compensation already received this year, but the reduced pay levels will be the base for making decisions on salary in 2010, Feinberg said.

The executives will still be subject to compensation limits as long as their companies are receiving support from the government's $700 billion bailout fund. Their total compensation was being cut in half, on average.

Feinberg got the job as pay czar earlier this year when Congress, responding to outrage about huge bonuses being paid to AIG, amended the bailout law to require that executive compensation at companies getting exceptional assistance be curbed.

He has been reviewing compensation packages since August and called many of the negotiations "intense."

Speaking at the White House, President Barack Obama welcomed Treasury's decision and said Americans' values are offended by excessive paychecks for executives whose companies were bailed out by taxpayers. He urged Congress to pass legislation to give shareholders a voice in executive pay packages.

"It does offend our values when executives of big financial firms that are struggling pay themselves huge bonuses even as they rely on extraordinary assistance to stay afloat," Obama said.

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