Dec. 11, 2009 — -- The Obama administration's pay czar, Ken Feinberg, released new rulings today on the pay packages for some of the highest-paid employees at companies receiving what the administration deems "exceptional assistance" from the government.
Feinberg is limiting cash salaries at the firms to $500,000, except in "exceptional cases." To date, the companies have identified about 12 exceptional cases.
"The negotiations with these companies have been very cordial, very constructive," Feinberg said. "There's been some disagreements but I think there's general acceptance that the process has worked out very well."
Chrysler and Chrysler Financial are exempt from the new rules because they have no employees (with one exception) among their 26th-100th highest-paid that earn more than $500,000.
Feinberg, the special master for Troubled Asset Relief Program executive compensation, called the new rules "mandatory prescriptions that these companies must follow."
The message is starting to sink in on Wall Street, he said. "They are beginning to make strides to follow some of these principles we've established within my jurisdiction," he told ABC News today. "Now whether and how long they'll adjust or whether they'll adjust to all of these principles -- less cash, less guarantees, more stock, more long-term stock tied to the success of the company in the long-term -- remains to be seen."
In late October, Feinberg issued his rulings for 2009 compensation for the 25 highest paid employees at the same six companies as well as Bank of America, which repaid $45 billion in taxpayer money this week and is now exempt from Feinberg's supervision.
Feinberg's controversial rulings in October cut the annual salaries for the top 25 executives at the seven companies by an average of 90 percent from 2008 levels. Overall, the total compensation for the executives, including yearly bonuses and retirement pay, was cut by an average of about 50 percent.
Any executive who wants more than $25,000 in special perks such as private planes, limos, company cars or country club memberships was mandated to receive government permission first.
Some companies were hit harder than others. Total direct compensation at GMAC declined by $413 million. Citigroup saw its total direct compensation fall $272 million and its cash compensation drop $244 million, a decrease of 96 percent.
In recent weeks, AIG has appeared especially frustrated with Feinberg's supervision.
Earlier this week, five AIG employees threatened to quit if the upcoming rulings from Feinberg resulted in a steep reduction of their pay. Since then, two of the employees have withdrawn their notice and none have stepped down, a source familiar with the matter told ABC News.
Capping Executive Pay
AIG's new chief executive, Robert Benmosche, came close to leaving the company last month, frustrated with Feinberg's supervision. Benmosche ultimately elected to stay on at the insurance giant but the CEO's dissatisfaction was evident in a letter he sent to employees.
"I and the Board are indeed frustrated and we are in ongoing discussions with Treasury and the Special Master to resolve the uncertainty surrounding this issue," Benmosche said. "We are all working aggressively to overcome this compensation barrier that stands in the way of restoring AIG's value and allowing us to live up to our obligations to all stakeholders."
A source familiar with AIG's situation acknowledged that Benmosche and Feinberg had "a real difference in opinion" in discussions about what constitutes acceptable pay packages at the company. However, the source stated, the two men now have "a good constructive relationship."
Benmosche's concerns stem from a fear that his company will be unable to attract and retain top talent in a competitive industry. When Feinberg issued his initial rulings in October on compensation for the 25 highest-paid employees at the seven institutions, only 13 AIG employees were affected because the other 12 had left the company.
But in his own defense, Feinberg said he's mindful of companies' needing to maintain their competitiveness.
"In establishing compensation practices and principles, I am very cognizant of the need for these companies to thrive and succeed and that is an element, a very important element of what I'm doing," he said.
Still, Feinberg in October cut AIG's cash payments by $34 million, a 90 percent drop from 2008 levels. The company's total direct compensation to the 25 executives was slashed by $28 million, a drop of 57 percent.
Feinberg also is working to reduce $198 million in retention payments that the company is set to hand out this March, after the insurance giant came under fire for dishing out $165 million in retention payments last March.
Such actions stem from two primary goals, Feinberg said. "One, get the taxpayers' money back," he said. "The secretary of Treasury has made it very clear that that's the primary objective; to repay the taxpayer.
"Bank of America has done it, Citigroup may be doing it," he said, "and I think that is very, very good news.
"Secondly, develop the series of principles, governing compensation, that will not only impact the companies under my jurisdiction, but like Goldman [Sachs], begin, maybe, to adopt some of those very principles that we've annunciated and have a broader impact than just the seven companies under my jurisdiction."