Kenneth Feinberg, the Obama administration's compensation czar, will in the next 30 days issue his blueprint for how the top 25 employees at AIG, Bank of America, Chrysler, Chrysler Financial, Citigroup, General Motors and GMAC should be paid, he told attendees at an FDIC conference on executive compensation in Washington.
Feinberg suggested the rules he lays out for these companies should serve as a precedent for the entire financial industry, said Jaret Seiberg, a policy analyst with Concept Capital's Washington Research Group who attended the event. But how broadly the rules are applied is up to officials with the Federal Reserve and SEC, Feinberg noted.
Under his mandate as the government's "special master" on executive comp, Feinberg will stipulate pay practices for the five most senior executives and the next 20 highest paid individuals at the seven designated companies. He plans to release pay rules for the next 75 employees at the firms by year-end.
Speaking without notes, Feinberg suggested that his approach may use stock-based compensation to encourage executives to stay focused on longer term corporate goals. Critics of what many see as excessive pay, particularly on Wall Street, have long argued that current compensation practices drive managers to maximize short-term financial rewards at the expense of broader company objectives.
Under Feinberg's plan, managers may get restricted stock they are barred from selling for three to five years. They also could receive stock that may not be sold until the company meets certain benchmarks, such as repayment of TARP obligations, or the IPO or sale of a specific business unit.
The rules are unlikely to include a so-called clawback provision, which would permit the government to recoup compensation at companies that have raised TARP funding. That would be a relief for financial and other corporate executives.
"If he shys away from using the clawback authority, I think that will permit the financial industry to focus forward on compensation practices and on building the business, which is a net positive for the sector," Seiberg said.