Obama orders pay cut for execs at rescued firms

[alfred russel]

Are you going to compete with investment banks, hedge funds, and private equity groups for any employees, or just take the leftovers?

I'll happily take the leftovers; remove the striving for the absolute top dog salaries, and I'm sure you weed out a lot of the douchebags.

Who is going to competently manage the IT system?

This, I am 100% sure I can get done for less than 200k.

I don't think you have priced people with heavy duty SAP experience recently.

[garbon]

I'll happily take the leftovers; remove the striving for the absolute top dog salaries, and I'm sure you weed out a lot of the douchebags.

Presumably those leftovers wanted top dog salaries, as well, but they failed to make the grade.

[MadImmortalMan]

This, I am 100% sure I can get done for less than 200k.

For a company the size of AIG? Not a chance.

[MadImmortalMan]

I don't think anyone still at these companies didn't know what the gig was months ago, and those who could found new places to work.

Looks like they have been.

Top employees leave financial firms ahead of pay cuts
Grass is greener where bonuses are sky-high
   


NEW YORK -- Even before the Obama administration formally tightened executive compensation at bailed-out companies, the prospect of pay cuts had led some top employees to depart.


The administration had tasked Kenneth Feinberg, the Treasury Department's special master on compensation, to evaluate the pay packages of 25 of the most highly compensated executives at each of seven firms receiving exceptionally large amounts of taxpayer assistance.

But Thursday, he ruled only on slightly more than three quarters of the pay packages that were to be under his purview. The balance reflected executives who have left since he began his work in June or will be gone by the end of the year.

Many executives were driven away by the uncertainty of working for companies closely overseen by Washington, opting instead for firms not under the microscope, including competitors that have already returned the bailout funds to the government, according to executives and supervisors at the companies.

"There's no question people have left because of uncertainty of our ability to pay," said an executive at one of the affected firms. "It's a highly competitive market out there."
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At Bank of America, for instance, only 14 of the 25 highly paid executives remained by the time Feinberg announced his decision. Under his plan, compensation for the most highly paid employees at the bank would be a maximum of $9.9 million. The bank had sought permission to pay as much as $21 million, according to Treasury Department documents.

At American International Group, only 13 people of the top 25 were still on hand for Feinberg's decision.

Feinberg did not detail how he plans to tackle the politically sensitive issue of nearly $200 million in bonuses due in March to employees at AIG Financial Products, the unit whose complex derivatives contracts led to the collapse of AIG last fall. Feinberg has urged the company to find a way to scale back the bonuses in hopes of preventing another round of public outrage.

In his written ruling Thursday, Feinberg noted that the firm had played a role "in the events necessitating taxpayer intervention," and concluded that AIG Financial Products employees should be paid only what their base salaries were on Dec. 31, 2008. In addition, he said that he continues to urge company officials to recoup the bonus payments that some Financial Products employees pledged to repay earlier this spring but did not. Until that issue is resolved, he wrote, employees should receive no pay in addition to their base salaries.

That news drew scorn Thursday from employees at AIG Financial Products who said they had repeatedly offered to rework their pay arrangements but that Feinberg was unwilling to work with them.

"He has zero credibility with FP employees at this point," said one employee, who was not authorized to speak on the record. "It's a very demoralized workforce."

Several of the companies said they had already been making changes in their compensation plans to better link executive pay to performance and that their compensation committees had worked closely with Feinberg's team to come up with a final plan reflecting that principle.

"We've been going down that road," said Bob Stickler, a Bank of America spokesman. "This is really more of the same." But he also said that the ruling "does go pretty far and there are competitive issues we're worried about."

On Wall Street, reaction to Feinberg's ruling was swift, with some executives arguing that it will further handicap the most troubled firms by driving away top employees while making companies unwilling to promote rising stars for fear of bringing them to Feinberg's attention.

But Nomi Prins, a former Goldman Sachs employee, said Feinberg's rulings are unlikely to change the culture of bonuses on Wall Street.

"I don't think Wall Street is afraid of this at all," said Prins, author of "It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street."

"It's going to affect a small portion of a small portion of the industry. It won't have a lasting impact."

[ulmont]

This, I am 100% sure I can get done for less than 200k.

For a company the size of AIG? Not a chance.

Per employee, MiM.

[ulmont]

I'll happily take the leftovers; remove the striving for the absolute top dog salaries, and I'm sure you weed out a lot of the douchebags.

Presumably those leftovers wanted top dog salaries, as well, but they failed to make the grade.

Not necessarily.  Even if assumed, though, there are a lot of reasons one can not be hired by someone paying the absolute top dog salary and still be competent.

[Zanza]

Thinking about it, 200k is too low a limit. But I still don't think you need to pay the original "at least 50 times that" to get people that are qualified to run the company.

[Martinus]

Anyway, I think in this discussion we confuse two completely different groups of people: the CEO (who are only several, maybe 20 for a big company like AIG) and the rank and file. Some arguments are true for one group but not for the other, and others vice-versa.

For example, in this work market climate, the rank and file is unlikely to easily find a better paid job for the competitor. On the other hand, the CEOs would be unlikely to be protected in case of a company's bankruptcy. And so on.

[MadImmortalMan]

There's only one CEO per company.

[Martinus]

There's only one CEO per company.

Ok then whatever these 14 out of 26 (or something) people that changed jobs are called, as per your article.

[grumbler]

I'm with those who think that this "highly competitive hiring market" on Wall Street is completely fictitious.  I am also one of those who is convinced that no employee could possibly be worth $1 million per year.  There may be specialists worth that kind of pay rate on a short-term basis, but no one is worth that on a day-to-day basis.

The reason top execs get multi-million-dollar-per-year compensation packages is because they can, not because they are worth it.  And the best top execs are not motivated by money.

[garbon]

Isn't that how people with less money generally feel?

[citizen k]

Isn't that how people with less money generally feel?

Generally.

[dps]

No, every other firm would have the possibility of matching the pay that might be offered to one of their executives by another firm.

No, they don't. Other firms going down the sink - even if it was just one division's catastrophic results sending them down - would not be underwritten by taxpayers to the extent that an overall corporate failure sees no real hurting in the pocket.

For example, the many small and medium enterprises that have nothing to do with either the housing bubble or financial crisis have to face the reality that declining orders and tighter lending will mean pay freezes and cuts, even for executives.

A lot of finance types tell us that were they not able to offer massive bonuses and generous renumeration, they would not hold on to their best staff. Well, so what? From my anecdotal evidence at least, even after the pruning of excess pay in the last two years the average banking salary is well above any other sector I can think of in the UK, at least.

I don't see why having talent spread to other sectors of the economy is such a bad thing. I  was always taught to believe that was the essence of capitalism: the resources and talent goes to the most profitable use.

Really, I do not see why saving the overall functioning of the banking system has to go hand in hand with moral hazard.

Yeah, the only reason that these companies are still in business is because the government used a ton of taxpayer money to bail them out (unwisely, IMO).  But given that they are still in business, it seems to me that they shouldn't be potentially hamstrung in their ability to attract and retain top people. 

[dps]

The reason top execs get multi-million-dollar-per-year compensation packages is because they can, not because they are worth it. 

The worth (in economic terms) of anything, be it your time, a fine diamond, or a used car that barely runs, is what you can get someone to pay you for it.  If you can get someone to pay you a million a year, or 10 million, then you're worth it to them.

Of course, when people get the ability to set their own pay, their time tends to be worth more.