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US orders 15-percent pay cut for bosses at bailed-out firms

March 23, 2010

President Barack Obama's pay czar ordered executive compensation at five prominent bailed-out firms to be cut by 15 percent on Tuesday, amid voter anger over Wall Street pay.

Kenneth Feinberg said 119 executives at AIG, Chrysler, Chrysler Financial, General Motors and its troubled former finance arm GMAC would this year see their cash rewards slashed by a third and total pay cut by 15 percent versus last year.

All five firms received taxpayer money to stay afloat during the financial crisis, which continues to weigh heavily on the US economic recovery.

Feinberg has pushed for companies to award more executive compensation in long-term stocks to tie their fate to the market value of the company.

In a statement the Treasury -- where Feinberg's office is located -- said 82 percent of the executives covered by the ruling will receive cash salaries worth 500,000 dollars or less.

It also announced that AIG's financial products division, seen as a major player in the sub-prime crisis, had given back 45 million dollars worth of bonuses.

Feinberg announced a review of past payouts at 419 firms that received government support as part of the 700-billion-dollar buy-up of troubled assets.

He sent a letter asking the firms to disclose pay details their top 25 executives who receive annual pay of more than 500,000 dollars.

The list covers many regional banks, marking the first time the government will look into pay at a broad swathe of firms that took government bailout funds.

But it also contains many familiar names from the financial crisis including Goldman Sachs, American Express, Bank of America, Chrysler, Morgan Stanley and Citigroup.

The review will "determine whether any payment was contrary to the public interest -- and, if any such payment is identified, will seek to negotiate reimbursements to the federal government," the Treasury said.

It is the latest in a series of pay reviews ordered by the Obama administration, which has denounced the culture of "fat-cat bankers" being paid large executive bonuses at failing firms.

In a September address at the heart of Wall Street, Obama bluntly warned bankers to stop excessive payments.

"We will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses," he said.

Sweeping financial legislation under discussion in Congress would give shareholders more of a say in executive pay, giving them the right to a non-binding vote and new compensation standards for listing on a stock exchange.

But critics say the pay limits at bailed-out firms stop them from attracting top talent.

The Treasury Department sought to dispel those criticism on Tuesday, saying 84 percent of the executives included in last year's rulings remain at their firms.

 

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