Pay Cuts Coming for Bailed Out Executives

(CBS/AP)  Updated 5:51 p.m. ET

The Obama administration plans to order companies that received huge government bailouts last year to sharply cut the compensation of their highest paid executives, according to a person familiar with the decision.

The seven companies that received the most assistance will have to cut the annual salaries of their 25 highest-paid executive by an average of about 90 percent from last year, said the person, who spoke on condition of anonymity because it has not been announced.

This person said Wednesday that the Treasury Department will announce the deep pay cuts within the next few days.

Kenneth Feinberg, the special master at Treasury appointed by Obama to handle compensation issues at the seven firms getting exceptional assistance from the government's $700 billion financial bailout package, is making the pay decisions.

A senior White House official tells CBS News that the president did not approve the pay cuts. Feinberg is empowered independently to make the decision, the official said, and that's what he did.

The seven companies are: Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial.

Notably absent from the list is Goldman Sachs, which has repaid the money it received directly from the government but has benefited significantly from government and taxpayer support in a number of other ways.

A government source tells CBS News that "the president has been pretty clear publicly about how he feels about executive compensation and it would be surprising if the president and the White House weren't pleased with what they have seen reported" about corporate pay cuts.

Total compensation for the top executives at the seven firms will decline, on average, by about 50 percent, according to the person familiar with the administration's decision.

At the financial products division of AIG, the giant insurance company which has received taxpayer assistance valued at more than $180 billion, no top executive will receive more than $200,000 in total compensation, the person familiar with Feinberg's plan said. The administration also will warn AIG that it must fulfill a commitment to significantly reduce the $198 million in bonuses promised to employees in its financial services division, the arm of the company whose risky trades caused its downfall.

The pay restrictions for all seven companies will require any executive seeking more than $25,000 in special benefits - things such as country club memberships, private planes and company cars - to get permission for those perks from the government.

Tom Wilkinson, a GM spokesman, said the auto company was "currently in discussions with Mr. Feinberg's office regarding executive compensation. We will have further information once those discussions have concluded."

Gina Proia, a spokeswoman for GMAC, said the finance company has "been working on a proposal that aims at embodying the principles set forth for compensation along with balancing the need to retain critical talent necessary to execute our turnaround. Until we receive notification about that plan, we have no further comment."

A spokeswoman for Chrysler Financial declined comment. A Chrysler spokeswoman did not immediately comment.

Feinberg's decisions on pay come after administration officials voiced sharp criticism in recent days of the plans of Wall Street firms to pay huge bonuses at a time when the country is still coping with rising unemployment and the effects of the recession.

Obama senior adviser David Axelrod called the bonuses "offensive" on Sunday.

"They ought to think through what they are doing and they ought to understand that a year ago a lot of these institutions were teetering on the brink and the United States government and taxpayers came to their defense," Axelrod said in an appearance on ABC's "This Week."

The pay cuts are not a surprise to the companies, a White House senior official said, because Feinberg has been working very closely with them.

[catzop]

The government should never had started the bail outs. If people makes mistakes in business they should be the ones that fixes it. Now everything is real messy! Thanks to the government.

[mcrider7]

I would like to see anyone in the Senate,Representatives,Oval house take a half pay cut, live with the new health reform, and retire on SSA, and see how far they would go. Of course the changes, doesn't affect their retirement, their income, or annual pay. But we live by their decisions. We pay the bail outs. So cutting executive base pay, and bonuses, will make everything right, Right!

[bubbadubba]

Yea, yea, they will order them to cut their huge bonuses and salaries by one cent and technically that is a cut.
What a deal, in the real world when a business manager or executive destroys a company with stupidity the company goes under and the exec has to go job hunting after he is fired. In the world of the wealthy the exec keeps his job and gets a huge salary and bonus.
I love the wealthy, they are so cool!

[endurorob_5]

$200K total compensation for top executives in these companies? So obviously Obama and his cronies want these companies to fail and have to continue to seek government aid. Great. A whole new welfare sect. The enviy that the dems and their nutty liberal followers for anyone that is more skilled, more intelligent, and makes more money thatn them os offensive. Anyone who does not see that this is an obvious step towards socialism is a complete moron. Get the idiots in goverment out of private business.

[ddaryl1]

Now do something similiar for non bailed uot companines

CEO pay in this country is way out of control, and the time is past due to trickle down that wealth.

Lets face the the fact that if we the people have more money to spend the economy will be better off. Focusing these monies into the hands of a greedy few is a major reason why our country is circling the drain

[r9119111]

Thank you President Obama. It is time to move on.

[imprisoncheney]

It was our money that bailed them out, so why should they be allowed to pocket it for themselves?

If they don't like it, let them go somewhere else to look for a job -- like one of those imaginary countries that has a lower tax rate than the US does for its ultra-rich (good luck with that!).

[sjc_1]

It is WEALTHFARE for the rich, ever since Reagan. The rich get richer and everyone else struggles to get by. The concentration of wealth and power in the hands of fewer and fewer of the privileged elite is at the root of the problem and will be the ruin of this country.

[auntc3]

by kevjustice October 21, 2009 10:33 PM EDT
U.S. CEO pay is much higher than CEO pay for other countries. WHY??????? I think we all know why.

wHY: greed/AND THEY CAN GET AWAY WITH WHATEVER THEY WANT...

CONTROLS ARE NEEDED.

[auntc3]

And to the EARLY SHOW.....I hope this is a permanent thing
CEO's of these large Companies get MILLIONS and you know they do.
This goes on in the Media, Sports, and Big Business....there has to be a limit. A baseball player signing for 43 Million for 3 yrs that is so discusting...No body is worth that kind of money. A soldier can put his life on the line, or a policeman or fireman, but if your a sports player....MILLIONS...it is evil to make that kind of money when your country is scrapping for Healthcare, food, and ways to pay their bills. I cannot believe this has not been mention once about SPORTS and MEDIA and the money involved. If the average AMERICAN knew the bottom dollar in these area's "THEY WOULD BE SHOCKED".