The Treasury Department official charged with overseeing compensation practices at bailed-out companies is preparing to force renegotiations of some of the more generous pay packages.
Kenneth R. Feinberg, the so-called pay czar, has authority over salaries and bonuses paid to the top-earning 100 employees at seven large companies that received money under the Troubled Asset Relief Program.
The issue of whether executives at firms that received taxpayer money to stay afloat has been a lingering source of public outrage since American International Group Inc. attempted to pay hundreds of millions of dollars in bonuses to employees of the same derivatives unit seen as responsible for the firm's eventual collapse.
The firms subject to Feinberg's oversight include AIG, Citigroup Inc., Bank of America Corp., General Motors Corp., Chrysler Group LLC, GMAC LLC and Chrysler Financial LLC.
Feinberg cannot void employment contracts out of hand, but he can force the companies to renegotiate them to conform to public standards of appropriateness. In the case of an employee who was guaranteed a $1 million dollar bonus for 2009, Feinberg might insist that that sum be deducted from any 2010 employment contract, the Wall Street Journal reported.
"Mr. Feinberg can certainly put all types of informal pressure on firms to get them to renegotiate," John Olson, a partner with the law firm Gibson, Dunn & Crutcher LLP, told the paper.
This type of moral suasion may be necessary with a profit-sharing contract between Citigroup Inc., which received $50 billion under the TARP program, and Andrew J. Hall, an energy trader who stands to make $100 million in bonuses by the end of 2009.
The Journal reported that Feinberg would be certain to try to convince Citigroup to reduce the compensation package, but if that was not possible would demand that the company charge the bonus off Hall's future earnings. Nevertheless, Citigroup is currently in negotiations to sell Hall's energy trading unit. So long as his contract is not sold to a TARP recipient, he might well end up being paid in full.
Kenneth R. Feinberg, the so-called pay czar, has authority over salaries and bonuses paid to the top-earning 100 employees at seven large companies that received money under the Troubled Asset Relief Program.
The issue of whether executives at firms that received taxpayer money to stay afloat has been a lingering source of public outrage since American International Group Inc. attempted to pay hundreds of millions of dollars in bonuses to employees of the same derivatives unit seen as responsible for the firm's eventual collapse.
The firms subject to Feinberg's oversight include AIG, Citigroup Inc., Bank of America Corp., General Motors Corp., Chrysler Group LLC, GMAC LLC and Chrysler Financial LLC.
Feinberg cannot void employment contracts out of hand, but he can force the companies to renegotiate them to conform to public standards of appropriateness. In the case of an employee who was guaranteed a $1 million dollar bonus for 2009, Feinberg might insist that that sum be deducted from any 2010 employment contract, the Wall Street Journal reported.
"Mr. Feinberg can certainly put all types of informal pressure on firms to get them to renegotiate," John Olson, a partner with the law firm Gibson, Dunn & Crutcher LLP, told the paper.
This type of moral suasion may be necessary with a profit-sharing contract between Citigroup Inc., which received $50 billion under the TARP program, and Andrew J. Hall, an energy trader who stands to make $100 million in bonuses by the end of 2009.
The Journal reported that Feinberg would be certain to try to convince Citigroup to reduce the compensation package, but if that was not possible would demand that the company charge the bonus off Hall's future earnings. Nevertheless, Citigroup is currently in negotiations to sell Hall's energy trading unit. So long as his contract is not sold to a TARP recipient, he might well end up being paid in full.
published July 27, 2009, 0 Comments
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