Pay Czar Limits Pay at Four Bailed-Out Firms

Kenneth Feinberg, pay czar for the Obama administration, mandated new capped pay for nearly 450 employees at companies that were deemed to receive extraordinary government assistance from the Troubled Asset Relief Program to battle the financial freefall.

The compensation rulings will apply to any pay in 2009 to the 26th to 100th highest paid employees at American International Group Inc. (NYSE: AIG), Citigroup Inc. (NYSE: C), General Motors Co. and GMAC. The standards will also carry over to act as a starting point for salaries in 2010.

Cash salaries for 2009 are capped at $500,000 for the executives of the four firms. This excludes the cases in which Feinberg granted exceptions to 12 employees, mixed from the four firms that have already been compensated in amounts above the cap. One person has received exception for a $1.5 million salary.

"Do not underestimate the importance of the decisions I am rendering today," Feinberg said.

Employees are to receive no more than 45 percent of their salaries in cash, with the rest being made up of the company’s common stock, and at minimum, half of the pay must be held over the next three years to ensure that pay is tied into the future success of the company.

Restrictions are also being placed on each of the company’s abilities to award "excessive" retirement and severance pay, as well as perks such as private jets and country club memberships.

Seven firms were forced to cap their top 25 paid executives in October. Only four have received restrictions this time due to Bank of America Corp. (NYSE: BAC) freeing itself from Feinberg's control by paying back its TARP loans. Also Chrysler Group LLC and Chrysler Financial were exempted because its executives made less than the cap.

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