INTERVIEW – Obama’s pay czar looking ahead to 2010 with deeper, not broader bite
By Steve Eder
WASHINGTON, Oct 27 (Reuters) – The Obama administration’s pay czar, who sent shock waves through Wall Street by slashing compensation at seven bailed-out companies, says those moves were just the beginning.
Kenneth Feinberg will soon start setting rules for 2010 compensation at the same companies, all on government life support, and this time his demands could be much more stinging.
Feinberg last week said he was cutting overall 2009 pay by an average of 50 percent for the top earners at the seven companies. Most of the firms downplayed the moves, noting they really only impact the last few months of the year.
But Feinberg told Reuters his 2009 rulings will likely have an impact on next year’s pay structures, and that next year he will deal with compensation for the entire 12 months.
“When we start talking about what to do in January 2010, we are building off of my recommendations for 2009,” Feinberg said in an interview at his Washington law office. “I don’t think it is so insignificant.”
Feinberg has so far ruled on pay for the 25 highest-paid employees at each of the seven largest recipients of government funds. By the end of the this year, he must rule on compensation for the next 75 earners on the companies’ pay scales.
Given frequent comings and goings at many of the bailout recipients, he will have to start from scratch next year with regards to many of the “top 25″ at the affected firms.
“We have to start anew in 2010 building on the 2009 compensation packages,” said Feinberg, seated in an office decorated with photos of him with politicians and framed editorials and news clippings about his various jobs. “The reason it is anew is because there will be different people in the top 25.”
Of course, some companies could escape Feinberg’s purview if they repay funds borrowed under the government’s Troubled Asset Relief Program.
Feinberg is looking at pay at seven companies that have received taxpayer assistance totaling more than $300 billion: American International Group Inc, Bank of America Corp, Citigroup Inc, General Motors Co, Chrysler, GMAC and Chrysler Financial.
In testimony prepared for a congressional hearing on Wednesday, Feinberg told lawmakers his authority should not be expanded beyond the seven companies.
“The Federal government should not enter the business
of micromanaging compensation practices beyond these seven companies by expanding my jurisdiction or broadening my discretionary authority,” Feinberg said in written testimony to the U.S. House of Representatives Oversight and Government Reform Committee.
Feinberg said on Tuesday during remarks at a symposium at Georgetown Law School, sponsored by The Aspen Institute, that his first wave of rulings were not driven by the public “outrage” that has engulfed Wall Street firms since the collapse of the financial sector last year.
Feinberg said he was doubtful his rulings would help satisfy the public thirst to punish firms that received exceptional bailouts.
“I am not sure I will be able to bridge the gap, which is huge, between Wall Street mentality and Main Street mentality,” Feinberg said during his remarks.
Feinberg — who was previously best known for overseeing the compensation fund for victims of the September 11 attacks — also can decide in coming weeks whether to issue advisory opinions on long-standing compensation deals, technically not within his reach.
Such matters include the pay of outgoing Bank of America Chief Executive Ken Lewis, who is owed about $125 million in retirement and accrued compensation. Lewis’ pact is outside Feinberg’s authority because it was agreed to before a February cutoff date.
Feinberg could also wield his power to try to “claw back” compensation paid to any employee of any company that accepted taxpayer bailouts, beyond the seven firms under his immediate authority. Feinberg has said he would only use this tool in the most “egregious” cases.
“I don’t want any of these companies to feel that the so-called czar has been arbitrary or imperious,” he told Reuters. “That is not what this process is all about.”
(Reporting by Steve Eder; editing by John Wallace and Tim Dobbyn) ((Reuters email: firstname.lastname@example.org; +1 646 223 6069))