October 22, 2009
Treasury announces deep cuts to auto, financial exec pay
Washington -- The U.S. Treasury this afternoon unveiled sweeping pay cuts for the top 25 executives at seven companies that received government bailouts, including General Motors Co., Chrysler Group LLC, GMAC Inc. and Chrysler Financial LLC.
In nearly all cases, salaries for the executives will be no more than $500,000 annually. No one at Chrysler will earn more than $500,000 in salary, and the company's CEO Sergio Marchionne will receive no salary from Chrysler, but be paid by Fiat SpA.
GM's president and CEO Fritz Henderson will see his $1.26 million salary cut to no more than $950,000. Just one other employee will receive more than $500,000 at GM in salary.
GM's pay for its top 25 execs will fall by 31 percent for salaries and 20.4 percent in total compensation. GMAC's salaries fell by 50 percent and total compensation 86 percent.
The Treasury released the salaries of the 25 executives at the companies, but didn't identify them. The pay cuts apply to November and December pay, not to money the executives earned in the first 10 months of the year. But the lower pay will be the basis for 2010 compensation.
The executives will get a chunk of salary in stock, but they can't cash that out for two years, and then must do so over three years.
The Treasury's special master for executive compensation, Kenneth R. Feinberg, briefed reporters and released results of his review of the proposed pay packages for the companies that have received a total of $300 billion from the TARP fund, which also includes American International Group, Citigroup and Bank of America.
Feinberg said he agreed to higher pay at Chrysler Financial because he said it is in the process of liquidating and will close by the end of 2011. Chrysler Financial's pay will decrease 30 percent over 2008 levels, and its total compensation fell by 56 percent.
Cerberus Capital Management LP officials said they were unaware of any liquidation orders and that closing isn't part of their business plan.
Feinberg announced he is cutting average compensation by 90 percent and salaries by 50 percent at the seven firms, and changing corporate governance, such as splitting the jobs of CEO and chairman. He also unveiled new scrutiny for annual executive perks worth more than $25,000 annually.
Executives at GM and Chrysler will take smaller hits than financial company executives, since they make less money, and many auto execs lost significant compensation during the companies' restructuring in bankruptcy. Feinberg told reporters that was a factor in his decisions.
Executives at the seven companies will not be able to cash in long-term restricted stock until the companies repay their government loans. But in the case of GM in which the Treasury swapped $42 billion in loans for a 61 percent majority stake in the company, it appears that only the remaining $8 billion loan must be paid back to qualify.
LINK:Treasury announces deep cuts to auto, financial exec pay | detnews.com | The Detroit News