Kenneth Feinberg, the White House appointed compensation watchdog, has requested large compensation cuts that are expected to be formally announced by the Treasury Department in the coming days.
The reductions impact executives and top-level employees at seven firms that still hold substantial government aid. Bank of America (NYSE: BAC), Citigroup (NYSE: C), AIG (NYSE: AIG), GM, Chrysler, GMAC and Chrysler Financial will likely see executive compensation cut in half, among other actions.
According to Feinberg’s plans, more than 150 executives will see pay cut to $500,000 or less annually, while future compensation will be more weighted toward stock that will vest after four years.
That has been public outrage recently over the retention bonuses AIG employees were set to receive following a massive government bailout that was needed due to major risks and losses attributed to the insurer’s financial products unit.
In recent weeks, AIG employees began to balk on promises to return millions in bonuses received in March as future compensation limits threatened them. Feinberg’s latest decision will likely lead to those employees passing on the remaining repayments promised, which legally they may be able to do.
The plan also calls for any executive, at the seven impacted firms, seeking more than $25,000 in special perks for things such as, country club memberships or company vehicles, to get permission from the government.
Companies that have already paid back government aid, such as Goldman Sachs and JP Morgan Chase are not affected by the current plan.
According to recent reports, Feinberg has pushed forward with his compensation reduction plan without seeking President Obama’s approval first.
White House economic adviser Larry Summers announced on Wednesday that Feinberg was going to substantially reduce pay at firms that have received billions in taxpayer’s money. The comments have proven true with today’s news.