Executive Pay To Be Cut At Bailed Out Firms

Photograph by dietrich on Flickr

The Obama administration is set to ask that executive compensation be dramatically lowered at seven companies which received the most government help. While the plan hasn't been made public yet, it's expected that pay will fall an average of 50% for the top 25 paid executives at Citigroup, Bank of America, American International Group, General Motors, Chrysler, GMAC and Chrysler Financial.

The NY Times reports, "The cash portion of the executives’ salaries will be slashed on average by 90 percent, and the rest will be replaced by stock that cannot be sold for years. But while the plan would pare compensation substantially from what the highest-paid people at the companies might have received under normal circumstances, it would still permit multimillion-dollar pay packages," and the Wall Street Journal says the "vast majority of salaries [will come] in under $500,000." An executive at one of the seven firms also told the WSJ that the rumored plan was "clearly much worse than what had been anticipated."

The toughest restrictions will be at AIG: In the financial products unit, which is blamed for much of the firm's problems, employees will not receive more than $200,000 in compensation. A compensation consultant tells Bloomberg News, "The government is acting like the owner they are, and they’re a pretty ticked-off owner. The fear is, will this make people throw up their hands and say, ‘I have to leave’?"

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By Jen Chung in News on October 22, 2009 9:44 AM

Comments [rss]

Qraymond

NOOOOOOOO. HOW WILL I BUY MY SECOND YACHT?

NOOOOOOOO!

JacqueMehoff

after watching last night's repeat of Frontline The Warning, I say get back to work on more regulation on this industry.

xnan

That was awesome, frightening, shocking, angry-making, AND revealing.

Mordicai

I don't mind if the executives who ran their companies into the ground leave because of pay cuts. Heck, get some young up n' comers in. Can't do any worse, can they?

hotstepper

+1 for the steaming pile of poop illustration.

Mr. Shankly

Unfortunately, the 'too big to fail' firms got bigger as they absorbed the ones that did.

ides_of_march

Good. I hope the CEO's will see that they made a deal with the devil when they accepted government bail outs. A pox on both their houses.

zodak

The fear is, will this make people throw up their hands and say, ‘I have to leave’

please leave. you suck. if you didn't: you wouldn't need a bailout.

Mr Mel

Really, and where exactly will they go?

Guest

Who cares?

hotstepper

follow the money to china.

Kojak

This is more a symbolic move than anything as only the top 1% of all employees will feel the pinch. Plus once they pay back the bailout money (with interest), they're free again to do what they want.

Mr. Shankly

They are the ones who 'steer the ship' after all. Now to put back the regulations recently undone.

Signed,

Shareholder of pretty ticked-off owner.