The Treasury Department issued long-awaited rules on executive compensation for financial institutions and automobile companies involved in the bailout plan.
Under the new regulations, compensation rates at seven of the largest firms to get funding through the Troubled Asset Relief Program will be reviewed by a new special master appointed by the Treasury. The objective is to "develop standards that reward innovation and prudent risk-taking, without creating misaligned incentives," said Treasury Secretary Timothy F. Geithner in a statement.
The seven firms subject to the rule include American International Group Inc., Citigroup Inc., Bank of America Corp., General Motors Corp., Chrysler Group LLC, GMAC LLC and Chrysler Financial LLC.
Kenneth R. Feinberg, who was appointed to oversee executive pay at the companies, will have the authority to decide the appropriate compensation for each firm's 25 highest-paid employees, including their five most senior executives. Mr. Feinberg is perhaps best known for his role in managing claims from the victims of the September 11 terrorist attacks.
In addition to giving special attention to the pay packages for the top 25 employees, Feinberg also have the right to review compensation decisions for the next 75 highest-paid employees of each of the seven firms.
According to the Treasury, all compensation packages valued at less than $500,000 will be automatically approved. Contrary to expectations, however, the new rules do not apply to any of the other institutions receiving bailout assistance. Instead, Treasury has imposed a less onerous set of regulations requiring transparency and open deliberation of executive compensation matters.
For instance, in order to limit compensation practices that encourage excessive risk-taking, the new rules require companies receiving bailout money to publish a narrative explaining how its compensation procedures mitigate that problem. In addition, firms must hold an annual, non-binding shareholder vote on executive compensation decisions.
Other rules for all TARP recipients include mandatory disclosure of the hiring of compensation consultants, and of the distribution of any perquisites to employees worth more than $25,000.
Under the new regulations, compensation rates at seven of the largest firms to get funding through the Troubled Asset Relief Program will be reviewed by a new special master appointed by the Treasury. The objective is to "develop standards that reward innovation and prudent risk-taking, without creating misaligned incentives," said Treasury Secretary Timothy F. Geithner in a statement.
The seven firms subject to the rule include American International Group Inc., Citigroup Inc., Bank of America Corp., General Motors Corp., Chrysler Group LLC, GMAC LLC and Chrysler Financial LLC.
Kenneth R. Feinberg, who was appointed to oversee executive pay at the companies, will have the authority to decide the appropriate compensation for each firm's 25 highest-paid employees, including their five most senior executives. Mr. Feinberg is perhaps best known for his role in managing claims from the victims of the September 11 terrorist attacks.
In addition to giving special attention to the pay packages for the top 25 employees, Feinberg also have the right to review compensation decisions for the next 75 highest-paid employees of each of the seven firms.
According to the Treasury, all compensation packages valued at less than $500,000 will be automatically approved. Contrary to expectations, however, the new rules do not apply to any of the other institutions receiving bailout assistance. Instead, Treasury has imposed a less onerous set of regulations requiring transparency and open deliberation of executive compensation matters.
For instance, in order to limit compensation practices that encourage excessive risk-taking, the new rules require companies receiving bailout money to publish a narrative explaining how its compensation procedures mitigate that problem. In addition, firms must hold an annual, non-binding shareholder vote on executive compensation decisions.
Other rules for all TARP recipients include mandatory disclosure of the hiring of compensation consultants, and of the distribution of any perquisites to employees worth more than $25,000.
published June 11, 2009, 0 Comments
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