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Banking industry

Treasury Orders Bailout Firms to Cut Executive Compensation

Strategic Insights

— 1 min read

The Treasury Department has ordered seven companies that received billions of dollars in government bailouts to cut the total compensation for their top executives by half. The reduction will apply only to pay earned after November, and average salaries for the top 25 executives at each of the seven firms will be cut by 90 percent starting next month. The move comes amid growing public outrage over executive compensation at firms that received government assistance. The decision affects the top executives at Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler, and Chrysler Financial.

Key Takeaways:

  • The Treasury Department has ordered seven companies that received government bailouts to cut the total compensation for their top executives by half.
  • The reduction will apply only to pay earned after November, with average salaries for the top 25 executives at each of the seven firms being cut by 90 percent starting next month.
  • The decision affects the top executives at Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler, and Chrysler Financial.
  • Cash salaries will be limited to $500,000 for more than 90 percent of affected employees, and perks will be capped at $25,000 unless approved by Feinberg's office.
  • The action is in response to growing public outrage over executive compensation at firms that received government assistance.
  • President Barack Obama welcomed the Treasury decision, saying Americans' values are offended by excessive paychecks for executives whose companies are bailed out by taxpayers.

Statistics:

  • 90 percent: average salary reduction for top 25 executives at each of the seven firms starting next month.
  • $500,000: cash salary limit for more than 90 percent of affected employees.
  • $25,000: perk limit, unless approved by Feinberg's office.
  • $700 billion: total bailout funding.
  • 7: number of companies ordered to cut executive compensation, including Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler, and Chrysler Financial.

Sources:

  • The Associated Press, "Treasury orders firms to cut executive pay", by Martin Crustinger, Washington, November 19.

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