Pay Czar Puts $500K Limit on Executive Compensation
The rules cover the 26th through 100th top-paid employees at firms who received exceptional assistance from the Troubled Asset Relief Program – AIG, Citigroup, GM and GMAC.
Feinberg for the 25 top-paid employees in October.
Under the rules, cash salaries would be generally limited to $500,000 a year. According to the Associated Press, there will be about 12 exemptions granted to executives so their companies will be able to "thrive, be able to compete, and not lose key people," Feinberg said.
Under the exemptions, one person will receive a $1.5 million salary. The remaining 11 will earn between $500,000 and $950,000. Feinberg did not identify those employees, or their companies, but acknowledged AIG is one of the companies given an exemption. AIG received more than $180 billion in government funds and came under intense scrutiny for issuing lavish bonuses earlier this year.
Chrysler and Chrysler Financial are subject to government oversight of compensation, but no employees surpass the $500,000 salary threshold.
Bank of America is no longer subject to federal restrictions after they in bailout funds this week.
Incentives will be paid only for "real performance," Knoller reports. The total cash component can't exceed 45 percent, and at least half the package must consist in "long term" compensation – such as stock – that must be held for at least three years.
The restrictions are in part designed to discourage the kind of reckless risk taking that led to the financial crisis:
"I think its completely fair that they should try and figure out a way to reduce the risk in the system to that we don't go through the agony of the past 12 months," banking industry analyst Dick Bove told CBS News.
Fringe benefits, such as private jet use, will be limited to $25,000 a year.
The new rules are in effect for the second half of December and don't impact employees who have already been paid this year.
The individual firms will implement the new standards and future exemptions will be decided by independent compensation committees at each company. Feinberg will continue to oversee the system.
Bonuses at U.S. banks are expected to soar by 40 percent this year. Bowing to a storm of criticism, Goldman Sachs, which has set aside more than $16 billion for compensation, said Thursday it will not pay cash bonuses to its 30 top executives, but instead will award them stock that cannot be sold for five years.