'Pay czar' to review top compensation deals at bailout recipients

By: JournalNow Staff | THE ASSOCIATED PRESS
Published: August 15, 2009

WASHINGTON

The Obama administration's "pay czar" is embarking on a review of proposed compensation packages for the top employees at seven companies that are on government life support, marking the first time that a federal official will have veto power over how much private-sector executives are compensated.

Kenneth Feinberg, who ran the government's fund for families of the victims of the Sept. 11, 2001, terrorist attacks, has 60 days to approve or reject the compensation plans submitted this week from bailout recipients. They include AIG, Bank of America, General Motors and GMAC.

Feinberg is expected to complete his review by late October, although Treasury spokesman Andrew Williams said yesterday that the 60-day clock will not start until Feinberg makes a determination that a company's submission is "substantially complete." He said that it could take some days, if not weeks, for Feinberg to make that determination for each of the seven companies.

Yesterday was the last day that the companies could submit proposed pay packages for their 25 highest earners. Feinberg is expected to negotiate the packages with the companies and will also approve broader compensation formulas that will apply to the 75 next-highest-paid workers at each company.

Feinberg will have a difficult balancing act: He faces pressure to curb diamond-studded compensation packages that have led to public outrage, but he must make sure that financial institutions and automakers can keep talented executives needed to steer them clear of government assistance.

Free-market advocates fault the government's role in overseeing the private compensation.

"In our country's heritage, we do not look kindly on the federal government insinuating itself into the private marketplace and micromanaging these companies," Feinberg told National Public Radio in June. "On the other hand, there's this populist sentiment today that there was excessive compensation paid to high-level company officials."

Compensation experts say that Feinberg will likely ask for changes that would align pay packages with executives' performance.