- The Washington Times - Tuesday, August 25, 2009

The Obama administration, which only months ago was blasting Wall Street for paying huge executive bonuses at failing companies, has quietly toned down its rhetoric in recent days about outsized corporate pay packages.

But the White House hasn’t abandoned its push to curb executives’ compensation at financial institutions that received taxpayer bailouts. Instead, it has handed off the task to its “pay czar,” Kenneth Feinberg, who has worked behind the scenes to draft compensation guidelines for the top employees at several struggling financial firms.

Mr. Feinberg’s role as an outside overseer helps insulate the White House from the appearance of meddling in the private sector while capitalizing on populist rage aimed at bailed-out firms like Citigroup and insurance giant American International Group (AIG).

“It’s a savvy approach in a host of ways,” said Norm Ornstein, a political specialist with the American Enterprise Institute for Public Policy Research, a conservative Washington think tank.

“You don’t want to make it look as if government is stepping in and running business. … At the same time, you can’t sit back and let companies that have been bailed out by the government follow their old compensation practices without getting in an enormous public populist backlash.”

When news broke last week that AIG President and Chief Executive Officer Robert Benmosche had been given an annual salary of $7 million plus long-term incentive awards worth up to $3.5 million a year, the administration’s reaction was unexpectedly subdued.

“The president has talked about we’re not micromanaging these companies,” White House press secretary Robert Gibbs said. “Government’s not making these decisions.”

Mr. Gibbs’ comments were in sharp contrast to White House rhetoric in March after AIG revealed that it had paid at least $165 million in bonuses to top executives - a move that Mr. Obama at the time called an “outrage.”

Mr. Feinberg, appointed in June to serve as executive compensation “special master” for corporate recipients of the $700 billion Troubled Asset Relief Program, this month began a 60-day review of pay packages at seven companies that received “exceptional” government assistance: AIG, Citigroup, Bank of America, General Motors, Chrysler and the financing arms of the two automakers.

Mr. Feinberg will review - and eventually accept or reject - the companies’ compensation packages for their top 25 employees. Later, he will review broader compensation formulas for the 75 next highest paid workers at each company.

Obama senior adviser Valerie Jarrett, in a recent interview with Bloomberg News, said that the administration hasn’t been briefed on Mr. Feinberg’s negotiations and that neither the president nor his staff will be involved in Mr. Feinberg’s decision.

“The expectation is that Ken will do his own independent assessment,” said Ms. Jarrett, Mr. Obama’s chief liaison to the business community. “His charge is to really balance retaining talent, aligning compensation appropriately with performance and making sure that we protect our investment.”

Mr. Feinberg, a high-profile lawyer and mediator who received praise for running the government’s fund for families of Sept. 11 victims, was the perfect choice for pay czar, Mr. Ornstein said.

Mr. Feinberg “is able to find a kind of sweet spot here - understand the larger political problems and the sensitivities, empathize with the people involved, but make sure that you keep things within some reasonable range,” he said.

Scott Talbott of the Financial Services Roundtable, a trade group representing some of the nation’s biggest financial services firms, agreed that the administration’s selection of Mr. Feinberg to broker compensation agreements was a good idea.

“With accepting government money comes restrictions, and we get that,” he said. “We are fine with Mr. Feinberg and his role.”

But Mr. Talbott, the Roundtable’s head lobbyist, said it would be wrong to assume that either the administration - or Congress - is any less committed to imposing pay and bonus restrictions on company executives than was the case earlier this year.

“They’ve taken a sort of measured approach to compensation,” he said.

The House last month passed a bill that would give federal regulators the authority to cap pay incentives if they think the provisions would encourage bankers and other financial executives to take risks that could threaten the economy or the viability of their companies.

The measure includes an administration-backed “say-on-pay” provision that would give company shareholders annual, nonbinding votes on top executives’ compensation, including lucrative arrangements such as “golden parachutes.” The Senate is expected to take up the bill when Congress returns from recess next month, but the bill’s prospects there are much less certain.

Mr. Talbott noted that the say-on-pay provision in the House bill would pertain to all publicly traded companies - not just companies rescued by the government.

“This represents the government taking a giant step inside the day-to-day operations of corporate America,” he said.

Republicans also have criticized the White House-backed compensation bill, saying it would be an inappropriate government intrusion into the private sector.

“Our economy has achieved success not through greater government interference and regulation but through competition and rewards,” said Rep. Tom Price, Georgia Republican, after voting against the House bill July 31.

Rep. Spencer Bachus of Alabama, the top Republican on the House Financial Services Committee, added that if the legislation becomes law, it would bring “unprecedented authority to unelected Washington bureaucrats to decide the pay of every American at every financial institution.”

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