Kenneth Feinberg, the Obama administration’s former special master on executive pay, said his decisions to cut executive pay at bailed-out companies including Citigroup Inc. and Bank of America Corp. have triggered some initial positive results.
“Only time will tell if I was successful in achieving the right balance, but the initial indications are positive,” Feinberg said in testimony prepared for a hearing today before a congressional panel overseeing the Treasury Department’s Troubled Asset Relief Program. Feinberg said 84 percent of the executives covered by his 2009 rulings remained with their companies.
Feinberg, 64, was appointed in June 2009 to monitor compensation at seven firms that received taxpayer bailouts. Top executives at those companies, which also include American International Group Inc. and General Motors Co., saw their pay cut, on average, by 50 percent because of Feinberg’s orders.
If Treasury “gets executive pay right, it could help lay the foundation for long-term financial stability,” Senator Ted Kaufman, chairman of the Congressional Oversight Panel, said in a statement. “Any mistakes, on the other hand, could contribute to the next financial collapse.”
Kaufman, a Delaware Democrat, was appointed by Senate Majority Leader Harry Reid to replace Elizabeth Warren, who left the panel last month to help set up a new consumer watchdog agency created by the financial overhaul law.
How much pay is excessive remains a subject of debate as Wall Street firms disclose funds set aside for compensation in financial statements. Goldman Sachs Group Inc. said Oct. 19 it was designating $13.1 billion for compensation and benefits in the first nine months of the year, down 21 percent from a year earlier, as revenue fell 14 percent.
The amount, equal to 43 percent of revenue, is enough to pay each of the New York-based firm’s 35,400 employees $370,706 for nine months’ work. That’s down from an average $527,192 for the firm’s 31,700 workers a year earlier, according to Goldman.
Feinberg left in September to become administrator of BP Plc’s fund to pay claims stemming from the Gulf of Mexico oil spill. Patricia Geoghegan, a Treasury Department lawyer, was named acting special master.
Citigroup, Bank of America and Chrysler Financial Corp., are no longer subject to the special master’s decisions. AIG, GM, Chrysler Group LLC and Ally Financial Inc. remain subject to future decisions.