The four companies still receiving government bailout aid won't be able to raise the amount of cash they pay out to their top executives this year, the administration's pay czar has ruled.
The decisions, released late Friday, cover 2011 compensation for the top 25 executives at General Motors Co., Chrysler, American International Group Inc. and Ally Financial Inc., the former financing arm of GM. The rulings clear the way for millions of dollars in salary and bonuses to be paid out by companies that are still repay the billions in aid they received during the financial crisis from the government's $700 billion Troubled Asset Relief Program.
While the companies can't give cash raises, they are being allowed to boost the value of deferred stock awards to their executives. The Treasury Department defended that decision, saying it is in line with pay guidelines that it used to make compensation decisions in 2009 and 2010.
The government's findings do not identify the executives by name but only by salary rankings.
The highest-paid executive at insurance giant AIG will total compensation of $10.5 million in 2011, including a $3 million salary, the largest of any of the pay packages approved Friday by the pay czar. AIG confirmed in a filing with regulators Friday that President and CEO Robert Benmosche's pay will stand at $10.5 million this year, the same package he received in 2010.
GM's highest-paid executive will receive $1.7 million in salary for 2011 and performance-based stock awards that will bring total compensation to $9 million. The highest-paid executive at Ally Financial will receive no cash salary in 2011 but can be granted performance-based stock awards worth $9.5 million. GM is headed by Chairman and CEO Dan Akerson, and Ally's CEO is Michael Carpenter.
AIG nearly went under during the 2008 financial crisis. It had written insurance on the value of hundreds of billions in mortgage investments held by financial institutions. When the investments lost value, AIG could not afford to make good on its contracts. It took government help to stay out of bankruptcy and received a bailout package with a total value of $182 billion. The government got a 92 percent stake in the company and hopes to start selling the shares soon to help recoup its money. The company also has been selling off assets to repay the aid.
Taxpayers provided a total of $49.5 billion to GM as it went through a bankruptcy reorganization in 2009. The Treasury Department has trimmed its stake in GM to 26.5 percent of the company from 61 percent, when it sold $23.1 billion of GM stock at an initial public offering in November. Treasury will need to sell its remaining GM shares at an average price of $53 to break even on the bailout.
Ally, which is 74 percent owned by the government, announced this week that it is preparing an initial public stock offering as a way to repay a portion of the $17.2 billion in aid it received.
The highest-paid executive at Chrysler, Sergio Marchionne, who is head of both Chrysler and Italy's Fiat, is not affected by the pay restrictions because he receives his salary from Fiat. The pay czar's filing showed that the second-highest paid executive at Chrysler will receive $500,000 in cash salary this year and total compensation of $1.18 million.
The compensation decisions were announced by Patricia Geoghegan, who succeeded Kenneth Feinberg last September. Geoghegan, a tax and compensation lawyer, came to Treasury after retiring as a partner from the New York law firm of Cravath, Swaine and Moore.
Feinberg's departure last fall ended a contentious 14-month career as pay czar in which critics contended he had not done enough to reign in excessive salaries and bonuses at companies rescued by billions of dollars of taxpayer support. Feinberg now oversees a $20 billion fund created by BP PLC to compensate victims of the Gulf of Mexico oil spill.
Feinberg argued that his efforts had laid the foundation for a new compensation system based on longterm performance.
In a final report, Feinberg recommended that future compensation decisions should place limits on guaranteed cash payments and require that pay packages have a significant performance component.
Sen. Bernie Sanders, I-Vermont, one of Feinberg's most vocal critics, contended that Feinberg had not been tough enough in cracking down on the pay excesses on Wall Street that had contributed to the financial crisis by encouraging excessive risk-taking.
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