PRESIDENT Barack Obama's administration is poised to order cash salary cuts of 90 per cent on average for top executives at firms that received the biggest government bailouts, according to media reports yesterday.
The seven companies that received the most government assistance at the height of the US financial crisis will each be required to cut the salaries of their 25 best-paid executives. The firms are AIG, Bank of America, Citigroup, General Motors, GMAC, Chrysler and Chrysler Financial.
Smaller companies and those that have repaid the bailout money, including Goldman Sachs and JPMorgan Chase, are not affected. These banks last week reported record quarterly profits and have set aside tens of billions to reward their staff. Goldman, for example, has earmarked US$16.7 billion (S$23 billion) for compensation so far this year, or more than US$500,000 per employee.
For the affected seven firms, the biggest cuts will be to the cash portions of the 175 employees' salaries, which will be slashed by an average of 90 per cent, and will mostly fall below US$500,000, the Wall Street Journal said.
- The 175 executives targeted by 'pay czar' Kenneth Feinberg are not only the highest-paid but also considered among the most talented and productive from seven companies that have received billions of dollars in taxpayer money.
Their base salaries will be slashed by an average of 90 per cent.
- That applies to the five top executives and the next 20 highest-paid employees at Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial.
- Another 525 employees at the companies will also face new curbs on pay from Mr Feinberg, but those details have not yet been released.
- The government did not want to make executives return compensation already received this year, but the reduced pay levels will be the base for making decisions on salary in 2010.
- The executives will still be subject to compensation limits as long as their companies are receiving support from the government's US$700 billion (S$975 billion) bailout fund. Their total compensation was being cut in half, on average.
- Cash salaries will be limited to US$500,000 for more than 90 per cent of affected employees. Personal expenses for such perks as company autos and corporate jets will be capped at US$25,000 without approval from Mr Feinberg's office for higher payments.- The pay restrictions for all seven companies will require any executive seeking more than US$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. -- AP