Saturday, February 27, 2010

Obama pay czar: Public 'right to be angry' about exec bonuses

The Obama administration's chief point person on executive pay, Kenneth Feinberg, is getting a lesson on public anger after dealing with national grief. He used to be special master for the September 11th Victim Compensation Fund.
Nowadays, he's regulating pay for a handful of bailed-out companies such as AIG and General Motors and dealing with public frustration over Wall Street pay packages.

"I would say you're right to be angry, you're right to be frustrated,'' Feinberg said at a media briefing before a speech at Vanderbilt University Law School on Friday.

"But these companies should thrive, and that will benefit the American people. It's a tough balance."

Feinberg was the keynote speaker at Vanderbilt for a conference on executive compensation, where he laid out his prescription for sound pay practices.

He hopes his measures will have a greater impact on more companies than just the few bailed-out ones he actually regulates: AIG, General Motors, GMAC, Chrysler and Chrysler Financial.

Citigroup and Bank of America have paid back the U.S. Treasury for their TARP money, so Feinberg no longer regulates pay packages at those companies.

Margaret Blair, a Vanderbilt economist who attended the conference, said she believes Feinberg is influencing pay packages nationwide.

"I think he's having an impact on the culture of compensation,'' she said. "The culture of pay is hard to change, and I don't know if it will change much after the recession."

At the conference, Feinberg continued to defend his decision, revealed earlier this month, to allow $100 million bonuses to AIG executives in the company's failed financial products division.

Although the law allows him to invalidate contracts the company made with employees, he said that would be "a bad idea." Government regulators advised him those bonus contracts were legally valid.

Instead, he said he has renegotiated some contracts with executives of bailed-out companies so they get paid in stock instead of cash, meaning they will be rewarded if the company does well in the future.

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