- The Washington Times - Saturday, December 12, 2009

U.S. pay czar Kenneth Feinberg on Friday cut compensation to $500,000 for executives at firms receiving government bailout money - then promptly waived the new rule for about a dozen executives deemed too important to lose.

Mr. Feinberg, named by the Obama administration in June to oversee pay practices at seven companies under the Troubled Asset Relief Program, shrank compensation for the 26th-highest-paid employee through No. 100 at four bailout recipients: Citigroup Inc., American International Group, General Motors Co. and the automaker’s former lending arm, GMAC.

In October, Mr. Feinberg announced specific pay packages for the top 25 executives at the firms he oversees. Their overall compensation packages, including bonuses and early retirement, were cut by an average of almost 50 percent.

The new ruling does not apply to the Bank of America because this week it repaid the $45 billion it borrowed from the TARP fund. Chrysler and Chrysler Financial also were exempt because executives there earned less than $500,000.

No employee of the four firms will receive base compensation of more than $500,000 this year - with a handful of exceptions. Cash is limited to 45 percent of pay; at least half of the total compensation must be in stock and cannot be redeemed for at least three years.

But Mr. Feinberg waived the $500,000 cash salary limit for about 12 unidentified executives who were deemed essential to their firms. Of those, one will make $1.5 million, while the rest will be paid from $500,000 to $950,000.

Hobbled financial firms need the wisdom of veteran executives now more than ever, said John Challenger, chief executive of outplacement consulting firm Challenger, Gray & Christmas Inc.

“We have top companies that are like patients in the critical care unit, and they require extraordinary expertise,” Mr. Challenger said. “We are performing major heart surgeries on these companies, and if the best surgeons and the best medical team can’t be found because we can’t afford to pay them, we are putting the companies and the people who work for them at great risk.”

Mr. Feinberg’s ruling comes as French President Nicolas Sarkozy vowed to join Britain in introducing a tax on bonus pay.

The British proposal reportedly applies to bonuses of more than $41,000. French newspapers reported Thursday that France intends to follow suit with a 50 percent tax on bonuses of more than $39,000.

Mr. Feinberg’s ruling attempts to quell the routine Wall Street practice of paying bonuses regardless of performance. Bonuses will only be paid if objective performance goals are achieved. Incentive pay is subject to “clawback” if results fall short.

Fringe benefits, including country club memberships and the use of private jets, will be limited to a value of $25,000 per year under the new rules.

Friday’s edict will affect many workers’ year-end bonuses, which will now be subject to government review. They also will serve as a starting point for negotiations over pay packages for 2010.

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