US firms who received large amounts of government aid during the height of the financial crisis have been asked to make steep cuts in salaries of top executives.
US President Barack Obama’s administration has ordered drastic salary cuts in US firms who recieved tens of billions of dollars in emergency government loans during the height of the financial crisis.
‘Salary Czar’ Kenneth Feinberg of the US Treasury was appointed by Obama to handle the pay and compensation issue as part of the $700 billion government bailout Trouble Asset Relief Programme (TARP).
AIG, Bank of America, Citigroup, General Motors Co., GMAC Inc., Chrysler Group LLC and Chrysler Financial, must slash cash payments of their 25 corporate titans by up to 90 percent and slice total compensation by almost 50 percent.
Feinberg also took a shot at curbing extravagant individual corporate perks including country club membership, private planes and "golden handshake" payouts.
The treasury plan also proposes to turn existing cash guarantees held by executives into long-term stocks.
In a seperate move, the Federal Reserve unveiled new rules to curb pay awards at top banks that encourage excessive risk-taking which imperils the wider financial system.
Welcoming Weinberg's measures, President Barack Obama said it was "an important step forward" in curbing financial excess.
“This is really a reaction to the outrage that we have seen over the second round of bonuses, some of them record level,” said Nathan King, FRANCE 24 correspondent in New York.
Insurance giant American Insurance Group (AIG) came under fire for paying salaries and retention bonuses worth $165 million to employees after taxpayers pledged up to $180 million to keep it afloat.
However, the impact of the salary cuts brings no lasting repercussions to the Wall Street as the plan is limited to only a few individuals.
“It is not a change of culture… It is a slap on the wrist for the companies that haven’t turned around quickly and haven’t paid back the cash,” said King.
Date created : 2009-10-23