Executives at the largest firms to receive bailout assistance will see their compensation dramatically reduced, the Obama administration announced.
Under the plan, the top 25 executives at the seven firms to receive the most funding will earn approximately 50 percent of what they took home a year ago. In addition, the cash portions of their compensation will be slashed 90 percent, thereby more closely tying pay to performance.
The decision to cut salaries was not unexpected. After public outcry over massive bonuses being taken at firms dependent on public assistance, the administration appointed Kenneth R. Feinberg as pay czar, giving him power to set salaries for the top bailed-out firms.
Although his official report is due in the next few days, his informal efforts have already borne results. Citigroup Inc., facing pressure from Feinberg, agreed to sell a unit headed by a trader who stood to make $100 million rather than face a potential lawsuit if his salary was slashed.
And Kenneth D. Lewis, the chief executive of Bank of America Corp. who recently announced his resignation, agreed to forgo his own salary and bonus for the year after discussions with Feinberg.
In his report, Feinberg is also expected to impose limitations on company perks. According to the New York Times, executives at the top seven firms will have to receive the permission of the government to accept more than $25,000 worth of such things as country club memberships or company-issued cars.
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