Two major Detroit-based automakers are among companies that have received the most federal aid which the Obama administration will order to slash compensation for their highest-paid employees, an official involved in the decision has said.
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The plan, for the 25 top earners at seven companies that received exceptional help, will on average cut total compensation this year by about 50%, the New York Times reported naming General Motors, Chrysler and their finance arms alongside banks Citigroup and Bank of America and insurer American International Group (AIG).
The report said some executives, like the top traders at AIG, will face tight limits on their pay while the top-paid employees at all the affected companies will face new limits on perks.
The report added that any executive seeking more than US$25,000 in special perks – like country club memberships, private planes, limousines or company-issued cars – would have to apply to the government for permission.
The plan will also change the form of the pay to align the personal interests of the executives with the longer-term financial health of the companies. For instance, the cash portion of the executives’ salaries will be slashed on average by 90%, and the rest will be replaced by stock that cannot be sold for years, the NYT said.
But while the plan would pare compensation substantially from what the highest-paid people at the companies might have received under normal circumstances, it would still permit multimillion-dollar pay packages and would have no direct impact on firms that did not receive government bailouts or that have already repaid loans they received from Washington.
Therefore, it is unclear how much effect, if any, the plan will have on the broader issues relating to executive compensation, income inequality and the populist animosity toward Wall Street and corporate America, the New York Times said.
The paper said the plan, written by the treasury official in charge of setting compensation for bailed-out companies, Kenneth Feinberg, would be made public in a few days.
Wall Street is currently facing criticism and anger over the large year-end bonuses at many firms. There have been similar protests here in the UK over banking bonuses.
