Today, Special Master for TARP Executive Compensation, Kenneth R. Fienberg, ruled on 2010 compensation pay for the "Top 25" executives at the five remaining firms that have received exceptional financial assistance under the Troubled Asset Relief Program (TARP): American International Group, Chrysler Group LLC, Chrysler Financial, General Motors Company, and General Motors Acceptance Corporation Financial Services (GMAC). Because Bank of America and Citigroup previously repaid their exceptional assistance, they are not subject to the Special Master's 2010 rulings.
A brief summary of the rulings are as follows:
- Overall cash pay decreased by 33% compared to the cash compensation Covered Employees received in 2009.
- Cash salaries are limited to $500,000 or less, "with exceptions only where good cause is shown." This ruling affected approximately "82 percent of covered executives" subject to the rulings.
- Total compensation at AIG, GMAC, and Chrysler Financial was reduced by 15% compared to the pay executives received in 2009.
- Cash salaries at AIG Financial Products will (with one exception) stay frozen at the levels set in the October 22, 2009 determination, and all other pay at AIG Financial Products shall be in the form of stock "that must be held over time--to ensure that executives work for long-term taxpayer value rather than short-term gains."
- The CEO of GMAC will receive no cash salary, with all compensation to be paid in stock that must be held over the long term. In addition, no GMAC executive will receive a cash base salary of more than $500,000.
Today's rulings also "reaffirm the principles announced last year to bring executive pay into line with long-term value creation and financial stability," by continuing to require that (i) executives accept the majority of their pay in the form of stock that must be held over time; (ii) incentives to be paid only if objective performance measures were achieved; and (iii) any incentives be subject to clawback if the results giving rise to the payment do not hold up over the long term.
Separately, Special Master Feinberg released a letter sent to over 400 institutions that received TARP assistance prior to February 17, 2009 (when the more stringent TARP executive compensation limitations were imposed), requesting information on bonuses, retention awards, and other compensation over $500,000 paid to senior executive officers and the next 20 most-highly compensated employees (Covered Employees) of each TARP recipient from the date such recipient first received TARP assistance until February 17, 2009. The Special Master is required to undertake such a review pursuant to Section 111(f) of Emergency Economic Stabilization Act of 2008 (EESA), as amended, and Treasury regulations (31 C.F.R. § 30.16(a)), to determine whether any such payments were inconsistent with the purposes of section 111 of EESA or TARP, or otherwise contrary to the public interest.