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The Obama administration's corporate pay czar was poised Thursday to impose slashing cuts of up to 90 percent on cash salaries of top executives of firms rescued with billions of taxpayer dollars.
In a dramatic government intervention, Treasury official Kenneth Feinberg was due to target corporate titans from seven firms propped up by government bailouts, amid a growing public backlash at outlandish executive pay.
President Barack Obama hailed Feinberg's move as "an important step forward," even before it was officially announced, and said it would help purge Wall Street of the influence of bloated corporate bonuses.
Top executives at firms including Citigroup, AIG, Bank of America, and Chrysler were expected to suffer an average pay hit of up to 90 percent to bloated cash salaries which will mostly slump to below half a million dollars.
Other firms propped up with taxpayer support and facing salary cuts under the scheme include General Motors Co., GMAC Inc, Chrysler Financial, a government source said.
Obama appointed Feinberg to the new post of "special master" in June, with powers to reject salary plans from firms getting taxpayer help if they are deemed "excessive or inappropriate," officials said.
"I believe he has taken an important step forward today on curbing the influence of executive compensation on Wall Street while still allowing these companies to succeed and prosper," Obama said at the White House.
"We don't disparage wealth, we don't begrudge anybody for doing well. We believe in success.
"But it does offend our values when executives of big financial firms, firms that are struggling, pay themselves huge bonuses even when they continue to rely on taxpayer assistance to stay afloat."
Critics of the scheme have complained at government interference in the free market, or warn that the pay cuts may see already struggling firms loose top executive talent to competitors not subject to pay curbs.
General Motors said in a statement that it was in talks with Feinberg's office regarding executive compensation. "We will have further information once those discussions have concluded," a spokesman said.
Chrysler Group said was also working with Feinberg's office.
"We are awaiting public announcement of the findings and recommendations of the 'special master' and his team. We are not at liberty to discuss the matter further at this time," a spokesman said.
For many of the 175 executives targeted under Feinberg's moves, the cash they would have received will be replaced by stock that will be restricted from immediate sale.
Total compensation for the top earners, including stock and bonuses, was expected to drop on average by about 50 percent under the plan.
The Federal Reserve meanwhile unveiled rules to curb incentive compensation at banks that encourages "excessive risk-taking" and undermines the stability of the financial system.
The proposed rules, still in provisional form and subject to comment for 30 days, are part of an effort to toughen supervision to avoid a recurrence of the near-meltdown of the financial system last year.
The Wall Street Journal said that in his actions, Feinberg would also demand a series of "corporate-governance" changes at affected firms.
They included splitting the positions of chairman and chief executive officer and requiring boards of directors to create a committee to assess risk.
Some of the toughest pay restrictions will come at the financial-products unit of AIG, blamed for the insurance giant's near-collapse at the height of the crisis, the Journal said.
No employee within that unit will receive compensation of more than 200,000 dollars, it said, citing people familiar with the matter.
Leaders from the world's biggest economies pledged during a Group of 20 summit in Pittsburgh, Pennsylvania in September to tackle the issue of executive compensation in the financial sector, which many say played a role in encouraging reckless behavior by rewarding excessive risk-taking.
The Post said Feinberg will also seek to curtail some extravagant corporate perks offered to executives, including the use of corporate jets for personal travel, drivers and reimbursement for country club membership.
