Can Obama Rein In Executive Pay?

Aug. 14, 2009— -- The Obama administration has been embarrassed one too many times when companies that received billions of taxpayer bailout dollars then decide to pay out lavish bonuses to their executives.

Now, the president is trying to get a handle on those payouts. Seven companies that are essentially on government life support today have to tell the Treasury Department's pay czar, Kenneth Feinberg how much they plan to pay their 25 top executives.

"He's going to have unilateral authority to change the compensation for these people working for private companies," said Jonathan Koppell, an associate professor of politics and management at the Yale School of Management. "A lot of it is political theater. It's a way of demonstrating to the nation that the government leadership understands their frustration."

Taxpayers invested $352 billion to bail out these companies. The question now: how much leverage does that buy?

Take Citigroup. The banking giant received a $45 billion bailout and the government now owns a third of the company.

But Citibank energy trader Andrew Hall is still in line for a bonus of up to $100 million because he signed his contract before the Feb. 11 deadline allowed under the law. So he'll probably be able to keep up the mortgage payments on the 1,000-year old castle he owns in Germany.

Citigroup CEO Vikram Pandit promised to pay himself a salary of just one dollar this year. Presumably he has savings. Last year, Pandit's total compensation amounted to well over $38 million.

Feinberg has 60 days to review the compensation packages and propose adjustments.

"If the czar agrees to pay levels as it now stands there will be public outrage. If the czar cuts pay and performance slips at those institutions they'll blame the czar for poor results and investors will lose," said Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.