Pay Czar Expands Salary Caps

  • Playlist
  • Download
  • Embed
    <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

Pay czar Kenneth Feignberg announced limits on compensation for second-tier executives at four companies that received the biggest government bailouts. Meanwhile, Wall Street giant Goldman Sachs announced that its bonuses for 2009 would be paid in stock, not cash.


Now to the topic of executive compensation. Today, the government's pay czar announced more limits on compensation, covering the four companies that have received the biggest bailouts. The latest limits apply to second-tier executives. At the same time, Goldman Sachs is instituting some of its own restrictions on bonuses.

NPR's John Ydstie reports.

JOHN YDSTIE: The four companies directly affected by the new rules are AIG, Citigroup, GM and its financing arm, GMAC. In October, Kenneth Feinberg, the government's pay czar, cracked down on the compensation packages of their top 25 executives. This ruling affects the pay of the next 75 highest earners. Among the restrictions is a $500,000 limit on cash compensation and the elimination of guaranteed bonuses.

Mr. KENNETH FEINBERG (Pay Czar): You have to earn those bonuses through performance. And our preference is that that performance be rewarded, in appropriate cases, in stock rather than cash, so that the individual's compensation is tied to the overall performance of the company.

YDSTIE: In fact, Feinberg said the new rules require that at least 50 percent of all bonuses be paid in long-term stock held for more than three years. Cash bonuses would have to be paid out over a two-year period. Ironically, late yesterday, Goldman Sachs, maybe the healthiest and most profitable firm on Wall Street, said that its top executives would receive their 2009 bonuses in stock, which they can't sell for five years.

Goldman has weathered public outrage over its plans to pay out record bonuses one year after taking and then paying back billions in government aid. Feinberg said he thinks the government's effort to set guidelines for executive pay may have played some role in Goldman's decision and others like it.

Mr. FEINBERG: These are the type of determinations that are consistent with what we have been advancing over the past few months and these are good signs.

YDSTIE: But executive pay consultant Steven Hall disagrees.

Mr. STEVEN HALL (Executive Pay Consultant): I'm not sure how people on Main Street, who I think are voicing a lot of this outrage right now, I'm not sure how they are being made better out of this whole thing. In fact, in some cases, we might even be able to argue that they're worse off because there's no tax revenue coming into the states or federal government from these amounts being paid to people.

YDSTIE: Hall also worries that talented executives are leaving these troubles companies because of limits on pay. Feinberg said that was also a concern of the four companies he is overseeing. So he exempted nearly a dozen executives from the caps.

Mr. FEINBERG: It's written right in the law that my determinations, concerning compensation, must be based at least in part on these companies thriving, retaining talent, paying competitive wages. So, it is a factor, a very important factor. I think we have struck the balance pretty well.

YDSTIE: Because they're coming so late in the year, the restrictions announced today won't have much effect on executive salaries for 2009. But any year-end bonuses will be governed by the new rules. And the rules will set a baseline for salaries that covered companies for 2010. Chrysler and its financing arm are excluded from the deal because all of their second-tier executives will make less than $500,000 in 2009.

John Ydstie, NPR News, Washington.

Copyright © 2009 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR’s programming is the audio.



Please keep your community civil. All comments must follow the Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

NPR thanks our sponsors

Become an NPR sponsor

Support comes from