It was not unexpected that the Obama administration would come down hard on CEO pay, especially those companies who received major bailouts. The news today is that Washington attorney, Kenneth Feinberg, will make a demand of close to a 50 percent reduction in compensation for the seven top firms that received significant bail out funding from the government.
News out this morning indicate that the Obama administration is serious about the bonuses being given out to CEOs and will demand cut backs in pays packages that will involve close to 175 elite executives.
Source tell CNN news that for the past two months, Kenneth Feinberg has been thoroughly looking at pay plans for many of the companies that received bail out money and that includes Citigroup, AIG, Bank of America, General motors, Chrysler, GMAC and Chrysler Financial. The plan is to get these corporations to recompense the government back the money as soon as possible and not squander it out executive bonus pay.
The official plan is expected to be announced by the Treasury soon and there is word that annual salaries/bonuses of CEOs at the above seven firms are going to fall by at least 80-90 percent.
Some financial experts believe that targeting firms which received the most bailout funds will most likely results in loss of top talent that these firms so desperately need to get out of the recession.
According to reports, the firm which is really going o be hammered is AIG. Within AIGs contentious financial division, the sector that led to the company to near extinction, no worker is anticipated to receive more than $200,000 in total reimbursement.
Besides hammering at pay control, there is word on Wall Street that Feinberg is going to insist frequent changes in authority at the above seven firms.
So far all those involved in the issue including the Treasury Department, AIG, bank of America, Chrysler and GM have declined to comment on these news
The news about the clamp down by the Obama administration should come as no surprise. Just last week, retiring Bank of America CEO Ken Lewis announced that he would no longer accept a salary or bonus for 2009. However, this decision only came after a “nudge” from Feinberg, sources say.
To avoid the government’s wrath, some CEOs have taken it upon themselves to announce that they would limit their pay or bonus. Vikram Pandit, the high ranking CEO of Citigroup said that he would only accept a pay of $1 for the present year and will wait on a pay increase until the firm recovers. What Pandit forgets to mentions is that last year alone, he took home close to $11 million in salary and stock options.