Compensating Company Executives under the Troubled Asset Relief Program

• Published date: 01 September 2011
• Author: Kenneth Feinberg
• DOI: http://doi.org/10.1111/j.1467-8683.2011.00873.x
• Date: 01 September 2011

Commentaries

Compensating Company Executives under the

Troubled Asset Relief Program

Kenneth Feinberg

Special Master for Executive Compensation, U.S. Treasury

Over the last 20 or 25 years, I have given out an awful lot

of money, which makes me a nationally-recognized

philanthropist with other people’s money. It’s a very

interesting experience for me, but today we focus primarily

on my role at the Treasury Department with executive

compensation.

Until September 2010, I was the so-called “Pay Czar.”

Now I think that the press has given me a very unfortunate

title, “Pay Czar.” First of all, my grandmother in Lithuania

would be very confused. Secondly, it’s a bad title because it

connotes imperial, arbitrary edicts being imposed on

company off‌icials. That is not what I was doing. What I tried

to do was mediate and work out compensation packages.

Congress passed a lawregarding the seven private compa-

nies that received the most taxpayer assistance in order to stay

af‌loat during the crisis – Bank of America, Citigroup, AIG,

GM, GMAC, Chrysler, and Chrysler Financial – just those

seven companies. Congress said that the Treasury must cal-

culate the compensation packages for the top 25 off‌icials in

each of those seven companies. That is 175 people. That is all.

Treasury Secretary Geithner asked me to do the job and

appointed me the off‌icial at the Treasury to receive informa-

tion, calculate compensation, and impose it on the top 25

off‌icials at these seven companies. Now the law also said

that as soon as a company repays the taxpayer in full for

what it borrowed, it is out from under my jurisdiction.

After one year under my jurisdiction, Bank of America

and Citigroup borrowed money to get out from under my

jurisdiction in order to repay the taxpayer. They are out.

Chrysler Financial is in a runoff, so they are out. So now

there are four companies and 100 off‌icials – GM, GMAC,

Chrysler, and AIG. That is it.

PUBLIC INTEREST IN EXECUTIVE PAY

When I took on this job, I thought to myself, “This is a

sideshow. Nobody really cares about this. It’s only 175

people. I mean, what impact am I going to have on corporate

pay? Who cares?” It is such a small universe that I thought,

taking on the assignment, that it would be done quickly,

eff‌iciently, out of the public eye, and then I would then move

on. Well, I was wrong, 100 percent wrong.

The international interest in what I was doing was

amazing. It is one thing to promulgate vanilla prescriptions

about pay at Wharton, the Federal Reserve, the FCC, or the

FDIC:

“Pay shall not be guaranteed.”

“Pay shall be based on performance.”

“Pay shall be long-term, not short-term.”

“Individual pay should be tied to overall performance of

the company for which you serve.”

But I had a job where I had to take such prescriptions and

actually calculate the dollars. What is this guy worth? Why

and how? What is this woman worth? How come, and on

what basis?

There was widespread interest in a government off‌icial

actually saying, “You will make $3 million.You will make $8

million. You will make $800,000.” Everybody was interested,

and it turned out that as a public interest spectacle,there was

constant attention to what I was doing.

I also thought going in that I would get a lot of pushback

from free market, deregulation Republicans – and not just

Republicans. I thought I would get an argument like this:

“Government regulation of private pay is a bad idea. It’s

philosophically against our heritage. It’s counterproductive.

It’s none of the government’s business, and it is a terrible

precedent.” Nobody made thatargument to me, and I found

out why. That argument was trumped by two others.

First, “Let’s save our ammunition. The guy’s here with 175

people, so let’s not get too excited about it. It’s seven com-

panies and 25 people at each company. It’s not that perva-

sive. It’s not that all-encompassing. It’s a blip.”

492

Corporate Governance: An International Review, 2011, 19(5): 492–496

© 2011 Blackwell Publishing Ltd

doi:10.1111/j.1467-8683.2011.00873.x