Kenneth Feinberg, Pay Warrior

Oh wow. This is much more aggressive than anybody had dared hope it would be:

The seven companies that received the most assistance will have to cut the cash payouts to their 25 best-paid executives by an average of about 90 percent from last year…

And for all executives the total compensation, which includes bonuses, will drop, on average, by about 50 percent…

At the financial products division of A.I.G., the locus of problems that plagued the large insurer and forced its rescue with more than $180 billion in taxpayer assistance, no top executive will receive more than $200,000 in total compensation, a stunning decline from previous years in which the unit produced many wealthy executives and traders.

In contrast to previous years, an official said, executives in the financial products division will receive no other compensation, like stocks or stock options.

Are you feeling outraged? Well, remember that $200,000 a year makes you rich. (Yes, really.) But these guys are effectively civil servants now, and they deserve to be paid as such. And if they have any fiscal responsibility at all, they will have saved up a huge amount of their past compensation to tide them through this fallow period.

What this means is that the people who used to be the 25 best-paid employees are now going to be far down the list, with underlings making much more than they do. That’s OK too. There’s no particular reason why senior executives should always be the best-paid employees in any organization. Quite the opposite, in fact.

Comments

[captainccs:]

Why does the gov not cut the pork in the bills it creates in Congress? That would save trillions not just a million or two.

Better yet, let failing banks fail and stay out of business.

It's all posturing and nonsense.

End the Fed!

Oct 22 08:42 AM

[Joe Shareho...:]

There are mortgage brokers without a high school diploma making 200K this year. It's absurd really. Do I think the gov should be meddling in pay? Absolutely not. I agree the executives at these insolvent institutions should be making less - but how about zero. The gov should have let these institutions fail, not save them and then dictate pay. Opens up a pandoras box. Anyway, we are moving rapidly away from free markets, which will present a whole host of new problems.

Oct 22 08:50 AM

[user344210:]

"There’s no particular reason why senior executives should always be the best-paid employees in any organization. Quite the opposite, in fact."

While I've seen organizational theories that would advocate paying top-selling salespeople with variable comp more than corporate staff, even at the C-suite level, or line managers, I don't know of much in the way of any theory that says that any other employees (outside of sales) should ever be paid more than the most senior executives. Otherwise, why not leave the company at the seniority level at which the pay/work effort ratio maxes out? If that level is, say, "Director" or "VP", as opposed to "CEO", that company is going to have a heck of a time recruiting anyone good to be anything above a Director or VP.

Oct 22 09:01 AM

[Johann Galt:]

You have entirely missed the point. Yes, abuses ran, and still run rampant with respect to executive pay. But it is no answer to appoint some government official "Moses" and have him hand down what another's appropriate comepnsation should be. This kind of power will most certainly be abused. Joe Shareholder is correct- these corps should have failed- that would have solved the exec pay problem.

A far better solution would be to lessen the protections court's give officers of companies, and board members, as fiduciaries. It is nearly impossible to hold an executive responsible for looting a company. As bloated pay packages are clearly harmful to shareholders in many cases, a statutory abrogation of the court-created protections-that allows personal liability upon officers and board members- will alleviate this problem quickly.

But a "pay czar" in the United States of America? You must be kidding supporting this kind of collective thinking.

Oct 22 09:02 AM

[brandyjc:]

Yeah, it's easy to say that these corps should have failed...I'd almost agree with that, except that um, my 30 year term life insurance is with AIG, and I wouldn't be really thrilled to pay rates higher than I got 9 years ago, especially since I'm not yet rich.

Oct 23 02:22 PM

[KirbyJF1:]

Felix

Where do you have your head?

Kirby

Oct 23 04:28 PM