WASHINGTON – The Obama administration plans to significantly cut the pay of executives at the seven companies that have received the most bailout money, reacting to a growing outcry about new bonuses and other compensation at companies propped up by taxpayer dollars, according to people familiar with the decision.
The 25 highest-paid executives at the companies would have their salary cut by an average of about 90 percent from what they received last year, replacing the pay with stock that they would have to hold for a set period of time, the sources said. The goal is to reduce corporate decisions based on short-term gains and force executives to consider the long-term effect on the company.
The plan is being developed by Kenneth Feinberg, the Treasury Department’s special master for executive compensation under the $700 billion Troubled Asset Relief Program.
The plan affects the seven companies that have received “exceptional government assistance” above and beyond the capital injections provided to hundreds of companies under TARP. Those companies are American International Group, Citigroup, Bank of America, General Motors, Chrysler and the automakers’ financing arms, GMAC and Chrysler Financial.
Feinberg is supposed to announce his plan for executive compensation at those companies by Oct. 30. Under the plan, executives will have to apply for permission for any perks worth more than $25,000, such as use of company cars or private planes.
As Wall Street has begun recovering from the financial crisis, large bonuses and other pay for companies receiving bailouts have become the target of many.
Senate Banking Committee Chairman Christopher Dodd, D-Conn., said Sunday on NBC’s “Meet the Press” that “these firms on Wall Street need to understand that what they are doing by providing these bonuses, particularly when they received so much federal money, is an outrage in the country.”
Dodd said he hoped that Feinberg, lawmakers and others “can do something about getting these firms to back up and reduce these bonuses.”