Pres. Obama's pay czar Kenneth Feinberg has decreed that the top 175 executives at those firms receiving large amounts of bailout money will have their compensation cut in half.According to The Wall Street Journal, salaries will be hit with an average 90 percent cut. Feinberg will also demand these companies change their corporate governance structures as well.
The companies under Feinberg's authority are AIG, Bank of America, Citigroup, General Motors, GMAC, Chrysler Group and Chrysler Financial.
Feinberg's ruling is expected in a few days. The Journal said the news was met with great shock by some bankers, one saying the compensation restrictions were far worse than anyone anticipated. Others, like those at Citi, aren't quite as worried. The report said Citigroup agreed to revamp the contracts of a handful of traders and senior investment bankers. But Citigroup officials briefed on the company's conversation with Feinberg's office said salaries and total compensation of the company's highest-paid employees shouldn't shrink dramatically.
Still, the Journal said these executives won't exactly be in the poorhouse. Salaries will be capped to just under $500,000. Instead, employees will receive "salary stock"-long-term stock grants in lieu of cash that can't be touched for at least four years. And the sooner a company pays back the government's cash, the sooner employees will be able to access these grants.
Some analysts are saying that it could get to the point where the talent at these companies simply will not want to remain at these corporations, as seen in the following video.