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23 Oct. 2009 | Comments (0)

In all the excitement yesterday regarding Treasury Pay Master Kenneth Feinberg’s announcement about the compensation packages at seven of the largest TARP assistance recipients, I wasn’t able to locate his actual determinations. The U.S. Department of the Treasury officially released Feinberg’s report late yesterday following a press conference. Here are the highlights of Feinberg’s rulings. For the whole press release, click here:

The Special Master for TARP Executive Compensation Issues First Rulings

Today, the Special Master for TARP Executive Compensation Kenneth R. Feinberg released determinations on the compensation packages for the top executives at firms that received exceptional TARP assistance. Under the Emergency Economic Stabilization Act (EESA) as amended in 2009, the Special Master has a mandate to review all forms of compensation for five most senior executive officers and the next 20 most highly compensated employees at the seven firms that received exceptional TARP assistance (AIG, Citigroup, Bank of America, Chrysler, GM, GMAC and Chrysler Financial). The determinations announced today for the top 25 most highly paid at the seven firms receiving exceptional assistance: 1. Reform Pay Practices for Top Executives to Align Compensation With Long-Term Value Creation and Financial Stability
  • Reject cash bonuses based on short-term performance, as required by statute, in favor of company stock that must be held for the long term
  • Restructure existing cash "guarantees" into stock that must be held for the long term
2.       Significantly Reduces Compensation Across the Board
  • Average cash compensation down by more than 90 percent
  • Approved cash salary limited to $500,000 for more than 90 percent of relevant employees
  • Average total compensation down by more than 50 percent
  • Exceptions where necessary to retain talent and protect taxpayer interests
3.       Require Salaries to Be Paid in Company Stock Held Stock Over the Long Term
  • Stock is immediately vested, requiring executives to invest their own funds alongside taxpayers
  • Stock may only be sold in one-third installments beginning in 2011--or, if earlier, when TARP is repaid--aligning executives' interests with those of taxpayers
4.       Require Incentive Compensation to be Paid in the Form of Long Term Restricted Stock – and to be Contingent on Performance and on TARP Repayment
  • Require executives to meet goals set in consultation with the Special Master, and certification of achievement of goals by an independent compensation committee
  • Any incentives granted paid only in stock that requires three years of service and can be cashed in only when TARP is repaid
5.       Require Immediate Reform of Practices Not Aligned with Shareholder and Taxpayer Interests
  • Limits "other" compensation and perquisites
  • No further accruals under supplemental executive retirement plans or severance plans
  • About the Author:Gary Larkin

    Gary Larkin

    Gary Larkin is a research associate in the corporate leadership department at The Conference Board in New York. His research focuses on corporate governance, including succession planning, board compo…

    Full Bio | More from Gary Larkin

     

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