Cracking the whip on the practice of exorbitant salaries, the US government?s pay czar has slashed the compensation of top executives by 50 per cent at seven largest bailed-out firms including Citigroup and AIG.
The drastic move comes in the wake of widespread criticism of executives being paid huge salaries even as their companies survive on tax payers money.
The seven entities that have to comply with the latest directive are Citigroup, AIG, Bank of America, Chrysler, General Motors, GMAC and Chrysler Financial.
Kenneth R Feinberg, the pay czar appointed by President Barack Obama to look into compensation trend at TARP-funded firms, has also cut the average cash compensation of the high ranking executives at these companies by over 90 per cent Blaming excessive pay as one of the main reasons for the raging economic crisis, the US Federal Reserve has separately proposed new supervisory regulations on financial companies.
The pay czar?s directive would be applicable to top 25 most highly paid executives at these companies.
Feinberg said the cash pay has been reduced by over 90 per cent from 2008 levels while cash bonuses may no longer be paid to these employees.
Even including the value of stock that must be held for the long term, the pay czar in a statement said total pay package would be reduced by 50 per cent.
To tide over the financial turmoil, the seven companies received billions of dollars from the US.
The pay czar has approved base salaries of USD 500,000 or less for more than 90 per cent of the employees coming under this group of executives.
?Base salaries greater than USD 1 million were approved in just three cases: for the new CEO of AIG, as previously announced, and for two employees of Chrysler Financial, which will wind down its operations in the near term and cannot grant employees long-term incentives,? the statement noted.
Severely battered by the crisis, Citigroup?s India-origin CEO Vikram Pandit had earlier announced taking home just USD 1 as salary.
?(The) rulings require that the majority of salaries be paid in stock that must be held for the long term — giving executives incentives to pursue long-term value creation and financial stability,? the statement noted.
Moreover, the payment by companies for the personal expenses of executives has been capped at USD 25,000 with limited exceptions for unusual circumstances.