Archive for Kenneth Feinberg

Obama Pay Czar Targets Salary Cuts

Posted in Constitution, Czar, New World Order, Obama with tags , , , , , , , on October 6, 2009 by saynsumthn

From the Wall Street Journal:

WASHINGTON — The Obama administration’s pay czar is planning to clamp down on compensation at firms receiving large sums of government aid by cutting annual cash salaries for many of the top employees under his authority, according to people familiar with the matter.

Instead of awarding large cash salaries, Kenneth Feinberg is planning to shift a chunk of an employee’s annual salary into stock that cannot be accessed for several years, these people said. Such a move, the most intrusive yet into corporate compensation, would mark the government’s first effort to curb the take-home pay of everyone from auto executives to financial traders.

Pay czar Ken Feinberg is planning to shift part of top employees’ salaries at firms getting aid into stock that cannot be accessed for several years.

Mr. Feinberg is expected to issue by mid-October his determination on compensation packages for 175 of the most-highly compensated executives and employees at the seven firms he oversees. The companies are: American International Group Inc., Bank of America Corp., Citigroup Inc., General Motors Co., GMAC Financial Services Inc., Chrysler LLC and Chrysler Financial.

The move will further reshape pay at those firms and could complicate efforts by some of those seven companies to attract top executives and employees.

The issue could be particularly acute for Bank of America, which is searching for a successor to Kenneth Lewis, who announced plans to resign as chief executive of the company last week. A Bank of America spokesman said the bank declined to comment on compensation issues regarding the chief executive. “We have been in close communication with Feinberg and our compensation going forward is very much in line with his guidance,” the spokesman said.

WSJ’s Deborah Solomon details U.S. pay czar Kenneth Feinberg’s plans for clamping down on pay, which would focus on cutting annual cash salaries for many of the 175 executives and other employees under his authority. VIDEO HERE

The Obama administration has tasked Mr. Feinberg with more closely tying compensation to long-term performance, something the White House believes will help prevent employees from taking unnecessary risks for short-term gains. A government official said shifting some salary away from cash and into stock will help achieve those goals.
The move is aimed squarely at salaries, not bonuses, which are restricted under rules passed by Congress earlier this year. Firms receiving bailout funds cannot pay cash bonuses to top executives and employees and must comply with a host of other restrictions, including capping bonus payments at one-third of total compensation
It’s not clear what portion of an employee’s salary will be diverted to stock but a person familiar with the matter said that in some cases it could be more than 50%. Indeed, Mr. Feinberg employed this strategy in his Oct. 2 ruling on pay for Robert Benmosche, the new chief executive of AIG. Mr. Benmosche’s salary was broken into two pieces — a $3 million annual cash salary and $4 million annually in AIG stock that cannot be accessed for five years.

The Federal Reserve, which is planning to propose risk-based guidelines later this month that would affect the way tens of thousands of bankers get paid, is not expected to adopt Mr. Feinberg’s strategy in making its determinations. However, the Obama administration is hopeful that Mr. Feinberg’s pay structure will be viewed as something of a “best practice” and that other firms may voluntarily seek to use similar methods in determining compensation.

Andrew Williams, a Treasury spokesman, wouldn’t comment on Mr. Feinberg’s plans but said the pay czar was appointed “to help ensure that companies strike the right balance around their need to retain talent, reward performance, and protect the taxpayers’ investment. Obviously, we all have a shared interest in ensuring that those companies can return to profitability as soon as possible so that taxpayers can recoup their investment.

Mr. Feinberg, an attorney who is receiving no government compensation for his work, has been trying to convey some of his thinking in a series of recent public speeches and interviews. He doesn’t plan to set any hard-dollar ceilings for executive pay and said he is sympathetic to the need for companies receiving government aid to pay enough to attract talented employees and remain competitive.

At a speech before the Chicago Bar Association last week, Mr. Feinberg said he will not have done his job if companies react to his decisions by saying “that’s great, we’re going to lose all our people and we’re not going to be competitive.”

But at the same time, the administration is under pressure to rein in what many view as excessive compensation at banks and other firms.

Mr. Feinberg has been working closely with the firms and many are aware of his plans regarding salary, people familiar with the matter said. Indeed, in the Chicago speech, Mr. Feinberg said the negotiations have been “a consensual process…I’m hoping I won’t be required to simply make a determination over company objections.”

—Dan Fitzpatrick contributed to this article.

Write to Deborah Solomon at deborah.solomon@wsj.com

Obama’s ‘pay czar’ no stranger to big paychecks

Posted in Constitution, Holdren, Obama, Uncategorized with tags , , , , , , , , , , on September 16, 2009 by saynsumthn

By Karey Wutkowski and Steve Eder, Reuters August 28, 2009

REUTHERS REPORTS:

WASHINGTON — The “pay czar” tasked by the U.S. government with ruling on the eye-popping compensation of some of Wall Street’s top earners is far from a stranger to big paychecks and the trappings of wealth.

Kenneth Feinberg made $5.76-million last year as a partner in his Washington law firm, Feinberg Rozen LLP, according to a government ethics filing obtained by Reuters.

And his assets, which include a stake in his law firm, two homes and dozens of investments, are worth anywhere from $11-million to $37-million, according to the filing, which places assets in broad value categories.

His homes are a $1.66-million house in Bethesda, Maryland, near Washington, and a $1.96-million vacation home in West Tisbury, Massachusetts, on Martha’s Vineyard. And he has investments in a series of public companies, including eBay, Wal-Mart Stores Inc, Pepsico Inc, Bed Bath & Beyond Inc and Berkshire Hathaway Inc — though none in the banking and auto companies bailed out with government money, Mr. Feinberg’s ethics filing shows.

In addition to income from his law firm last year, Mr. Feinberg also reported gains on his investments, including dividends, and $53,624 received from eight law schools, including New York University, Georgetown University and University of California, Los Angeles.

He also reported $32,200 in income from his interest in Strategic Settlement Advisors Inc, a Washington claims settlement company. And he sold his stake in a real estate development on Jekyll Island in Georgia last year, making up to $1-million on the sale.

Seven companies still locked in the U.S. Treasury’s Troubled Asset Relief Program, including Citigroup Inc, American International Group Inc and Bank of America Corp, have had to submit proposed compensation plans for their 25 highest-paid employees to Mr. Feinberg. He also has oversight over compensation for the best paid at Chrysler Financial, Chrysler Group LLC, General Motors Co and GMAC Inc.

While Mr. Feinberg, who was appointed in June, is working for free as the “pay czar,” the fact that he is wealthy could bring some solace to critics on Wall Street who believe his lack of experience in the realm of executive compensation could color his decisions on how the top executives at major firms are compensated.

If he is successful and he is compensated as a successful person, it certainly gives him a different view on the evaluation of other successful people,” said Charles Elson, the director of the Weinberg Center for Corporate Governance at the University of Delaware. He said Mr. Feinberg’s salary would make him more sympathetic to other high-earners and more likely to enjoy a similar lifestyle.

After all, Mr. Elson said, “He’s being paid like a Wall Street lawyer.

Still, Mr. Feinberg’s mission is not to judge the number of zeros.

If you asked a citizen who earned considerably less than that to opine on whether payment was excessive or not, they might have a different answer from Kenneth Feinberg,” said Paul Hodgson, a compensation expert at independent research firm Corporate Library. “On the other hand, I think what he’s supposed to be looking at is not whether payments are excessive in size, but whether they are correctly structured and could encourage excessive risk taking.”

There may also be some questions about whether Mr. Feinberg, who remains a partner at his law firm, has any conflicts of interest, though the disclosures in his ethics filing are far from damning.

According to his law firm’s web site, three of the institutions whose compensation he is supervising are clients of the firm or have participated in mediation with it: Citigroup’s Citibank, AIG and Merrill Lynch, now part of Bank of America.

But the ethics filing, which lists four dozen firms as sources of income, shows Mr. Feinberg was a court-appointed ”neutral” mediator and did not represent the companies.

Mr. Hodgson said Mr. Feinberg’s legal work with firms that have received billions of taxpayer dollars — such as AIG and Citigroup — could be an asset.

I guess he’s occupying a similar kind of position now, being a mediator between Treasury and the banks themselves,” Mr. Hodgson said, adding that Feinberg’s prior work should have been made public at the time of his appointment.

A one-time chief of staff to Senator Edward Kennedy, Mr. Feinberg is also active politically, making more than $300,000 in campaign contributions since 1990, mostly to Democrats, according to the Center for Responsive Politics. The recipients include Barack Obama, Hillary Clinton and Christopher Dodd, chairman of the Senate Banking Committee.

He also serves on the boards of a series of non-profits, including the John F. Kennedy Library Foundation, Human Rights First, the Washington National Opera, and RAND Institute for Civil Justice.

He spreads his own banking across three institutions — Bank of America, Wells Fargo & Co’s Wachovia, and Swiss bank UBS.