Pay Czar will slash paychecks at bailed out firms. Well, some of them.
The seven companies that received the most assistance will have to
cut the annual salaries of their 25 highest-paid executive by an
average of about 90 percent from last year, said the person, who spoke
on condition of anonymity because it has not been announced.
This person said Wednesday that the Treasury Department will announce the deep pay cuts within the next few days.
Kenneth
Feinberg, the special master at Treasury appointed by Obama to handle
compensation issues at the seven firms getting exceptional assistance
from the government's $700 billion financial bailout package, is making
the pay decisions.
The seven companies are: Bank of America
Corp., American International Group Inc., Citigroup Inc., General
Motors, GMAC, Chrysler and Chrysler Financial.
Total compensation
for the top executives at the seven firms will decline, on average, by
about 50 percent, according to the person familiar with the
administration's decision.
At the financial products division of
AIG, the giant insurance company which has received taxpayer assistance
valued at more than $180 billion, no top executive will receive more
than $200,000 in total compensation, the person familiar with
Feinberg's plan said. The administration also will warn AIG that it
must fulfill a commitment to significantly reduce the $198 million in
bonuses promised to employees in its financial services division, the
arm of the company whose risky trades caused its downfall.
The
pay restrictions for all seven companies will require any executive
seeking more than $25,000 in special benefits -- things such as country
club memberships, private planes and company cars -- to get permission
for those perks from the government.
Since this only affects the top seven firms, it makes me think Freddie may be #8. Will any reporters ask the Administration why they are stopping at only seven? Why not the top 25? Top 50?
How much is the new head of Freddie making, anyway?
The pay package given to Freddie Mac's new chief financial officer
should have sent a message from Washington to corporate America about
how executive compensation standards must change. Instead, it did just
the opposite.
The government-controlled mortgage finance
company is giving CFO Ross Kari compensation worth as much as $5.5
million. That includes an almost $2 million cash signing bonus and a
generous salary that could top $2.3 million.
The Federal
Housing Finance Agency, which oversees Freddie Mac, approved the pay
package. A spokeswoman pointed to a statement that justified the
agency's approval of the pay, which was done in part because the amount
was comparable to what others in the financial services industry make.
Actually, Freddie and Fannie don't fall under the guidelines, because the monies they received didn't come from TARP. So they don't have to play by the same rules. What is interesting is that Ross Kari (the new head of Freddie) came from Fifth Third Bancorp, where he was CFO:
When Kari joins Freddie Mac on Oct. 12, he will receive a base
salary of $675,000 and is entitled to an additional $1.66 million in
cash for the year. The company said Kari will be paid in installments,
but did not specify the timing of those payments in a Sept. 24
securities filing. The company declined to comment beyond the filing.
Kari
will also receive performance-based pay at the board's discretion. The
target amount for that cash compensation is $1.16 million, but what is
actually given to Kari could be higher or lower.
His cash
signing bonus totals $1.95 million and will be paid out in semi-monthly
installments over the year. That money is supposed to cover what he
forfeited in stock options and grants when he left Fifth Third Bancorp,
where he served as CFO since last November.
Freddie Mac
also said it would immediately allow him to sell his home to the
company, waiving a 60-day offer period that is required for other
executives. It did not, however, specify which of his homes would be
covered; Kari has residences in Ohio, Oregon and Washington State,
according to the filing.
No doubt that Kari is an able
executive and has a hard task at hand. Before his 10-month stint at
Fifth Third, he worked in the executive ranks at the insurance company
Safeco and Wells Fargo.
Let's take a look at the Companies that have received the largest portions of TARP money, shall we?
|
Company
|
Bailout Funds Received (as of 1/14/09) |
| Citigroup |
$45 Billion |
|
AIG
|
$40 Billion
|
|
JPMorgan Chase
|
$25 Billion
|
|
Wells Fargo
|
$25 Billion
|
|
Bank of America (incl. Merrill Lynch)
|
$25 Billion
|
|
General Motors
|
$14.4 Billion
|
|
Goldman Sachs
|
$10.0 Billion
|
|
Morgan Stanley
|
$10.0 Billion
|
|
PNC
|
$7.6 Billion
|
|
U.S. Bancorp
|
$6.6 Billion
|
|
GMAC Financial
|
$5.0 Billion
|
|
SunTrust
|
$4.9 Billion
|
|
Chrysler
|
$4.0 Billion
|
|
Capital One Financial Corp.
|
$3.6 Billion
|
|
Regions Financial Corp.
|
$3.5 Billion
|
|
Fifth Third Bancorp
|
$3.4 Billion
|
|
American Express Financial
|
$3.4 Billion
|
|
BB&T
|
$3.1 Billion
|
|
Bank of New York Mellon
|
$3.0 Billion
|
|
KeyCorp
|
$2.5 Billion
|
|
CIT Group Commercial
|
$2.3 Billion
|
|
Comerica Incorporated
|
$2.3 Billion
|
|
State Street
|
$2.0 Billion
|
|
Marshall & Ilsley
|
$1.7 Billion
|
|
Northern Trust
|
$1.6 Billion
|
|
Zions Bancorp
|
$1.4 Billion
|
|
Huntington Bancshares
|
$1.4 Billion |
Fifth Third is on there. And so is Wells Fargo. So the guy who had a hand in putting at least two Companies on the top bailout list is now making a hefty salary at a bailed out firm that doesn't have any compensation constraints.
Must be nice to have those two Companies on your resume, and get a sweetheart deal on your compensation package from the Obama Administration.
How in the world can his pay package (not to mention even being considered for the job in the first place) ever be justified?
Recent Comments