Obama’s ‘Pay Czar’ Slashes Executive Pay at AIG, Others
Oct. 23, 2009 – Only weeks after approving an up to $10.5 million compensation package for the newest chief executive at taxpayer-rescued American International Group (AIG), President Barack Obama’s “pay czar,” Kenneth Feinberg, yesterday announced he was slashing executive pay by up to 90 percent for top employees at AIG and other firms bailed out by U.S. taxpayers.
The move means AIG executives will have their 2009 pay reduced by up to 90 percent from a year ago with a 58 percent reduction the average for the top 25 earners at the ailing insurance giant. Feinberg did not indicate whether the decision would affect AIG’s newest chief executive, Robert Benmosche, but he set a $500,000 ceiling for executive pay, unless a higher amount was deserved for “good cause.” Most executive compensation is to be paid in company stock rather than cash.
Other firms affected by Feinberg’s decision include Bank of America, Chrysler, Chrysler Financial, Citigroup, GMAC and General Motors.
The move comes about six months after President Obama found himself in hot water over executive bonus pay at AIG. After accepting a taxpayer-funded bailout valued at up to $182.5 billion, AIG intended to pay its executives hundreds of millions of dollars in “retention” pay designed to retain key employees at firms being sold to repay the insurer’s massive debt to U.S. taxpayers. U.S. Senator Chris Dodd (D-Connecticut) had amended the unread and non-debated $787 billion federal stimulus to require the bonuses be paid.
When a public furor arose over the bonus pay, Dodd and Obama initially claimed they knew nothing of the matter. But when reporters pointed out Dodd sponsored the amendment requiring the bonus pay be distributed, Dodd said he sponsored it only after being requested to do so by Obama’s administration. Compounding the problem, Dodd and Obama were among the largest recipients of campaign contributions from AIG employees, and the appearance of political corruption caused the President to demand the bonus pay be taxed heavily.
In the wake of the subsequent public outrage, Obama appointed Feinberg as the federal “compensation czar” in charge of reviewing executive bonus payments at companies accepting federal assistance. AIG earlier paid out $165 million in retention bonus payments to employees at subsidiary AIG Financial Products, which is responsible for crippling its parent company through exposure to risky credit default swaps tied to various mortgage markets.
When Democrats were preparing for their successful run for control of the U.S. Congress during the 2006 mid-term elections, Dodd sought campaign donations from executives and managers at AIG Financial Products. A top executive at a Connecticut-based unit of AIG Financial Products in 2006 told colleagues Dodd needed donations and instructed colleagues to donate and provide proof of their donations to company officials, according to the Washington Times report.
A Nov. 17, 2006, e-mail message sent to workers from AIG Financial Products Chief Executive Officer Joseph Cassano said Dodd was to become chairman of the Senate Banking, Housing and Urban Affairs Committee, which has federal oversight over the insurance and finance industries.
“Given his seniority in the Senate, he will also play a key role in the Democratic Majority’s leadership,” Cassano said in the e-mail message obtained by The Washington Times. “As he considers running for president in 2008, Senator Dodd has asked us for our support with his reelection campaign and we have offered to be supportive.”
Dodd’s campaign soon after collected more than $160,000 from AIG Financial Products employees at its Connecticut facility just before the Senator became committee chairman in 2007. Dodd later transferred the funds to his failed 2008 presidential campaign.
AIG employees and their spouses donated $121,378 to Dodd’s 2006 political campaign, $224,278 to his 2008 effort and $183,700 so far for Dodd’s 2010 campaign cycle, according to opensecrets.org. Cassano donated $7,118, according to the Center for Responsive Politics.