Treasury ‘pay czar’: Limit CEO base salaries

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The Arizona Republic

'Pay czar' Kenneth Feinberg delivers the first keynote speech of SABEW's 2010 conference, March 19, 2010, at the Cronkite School's First Amendment Forum.

PHOENIX, March 19, 2010 — Few financial issues have touched such a raw public nerve lately as salaries of Wall Street executives. Yet applying a balm in the right doses can be tricky.

Kenneth Feinberg, the Treasury’s Department’s “pay czar” overseeing compensation at firms that took federal bailout money, described the perception gap between Wall Street and Main Street on this issue as a “chasm.”

Executives at big financial firms “don’t understand what’s going on,” Feinberg told an audience of more than 100 business journalists in Phoenix Friday, “and I doubt they ever will.”

Although more than 400 firms took money from TARP or the Troubled Asset Relief Program, federal oversight applied only to seven firms that shelled out “extraordinary” pay.

Of these, Bank of America and Citigroup have already repaid the government and are no longer under Feinberg’s oversight. But five other firms still are: AIG, Chrysler, Chrysler Financial, General Motors and GMAC.

Feinberg, a keynote speaker at the Society of American Business Editors and Writers event, said that he must try to balance several issues, from making sure companies pay enough to stay competitive, to making sure compensation practices don’t encourage firms to assume excessive risk. He said that he strives to link executive pay with company performance without allowing his efforts to be viewed as vindictive.

Among his key principles: Executives shouldn’t receive more than $500,000 in base salaries but should receive long-term stock interests in their firms. Feinberg said he has had to lean on academia for help in structuring pay because of a lack of industry consultants who are truly independent.

Most of the firms on his watch have been willing to compromise on pay, except for AIG, he said.

Feinberg also said he’s trying to balance competing tensions surrounding the proper role of government in companies’ affairs. But since Uncle Sam lent these firms critical cash to stay afloat, a role for government is easier to rationalize, he said.

“The American people, as a creditor, should have a say in what these companies pay,” Feinberg said.

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