Tuesday, October 20, 2009

"Chasm" between Wall St. and Main St. perception of pay; Compensation Czar Feinberg comments

I've learned about the incredible gap, the chasm between Wall Street perceptions and Main Street perceptions. It is a formidable chasm that I'm not sure can be bridged, although the law requires me to attempt to bridge that gap. Kenneth Feinberg, National Conference of Directors, 10/20/2009.

Feinberg's comments accompany the expectation that he will publicly release his rulings on the compensation packages submitted to him. Brief recap: Feinberg is the Special Master ("Compensation Czar") under TARP for all issues related to executive compensation. Part of his duties are to review and approve compensation for senior executives at companies that received substantial federal monies. This includes AIG, BofA, Citigroup, GM, GMAC, Chrysler, and Chrysler Financial. Blawg discussion about Feinberg and his role as Compensation Czar can be found here.

Some of Feinberg's public comments at the Conference are worth repeating here. Principally, he described the various methods he has used to deal with executive compensation contracts concluded prior to the distribution of the federal monies (and therefore largely beyond his simple approval of disapproval). He suggests in alternate order:

- that although he could in theory attempt to invalidate contracts, he has not;

- that he could, and frequently has, renegotiated contracts;

- or that if the contract must remain intact, he then reviews the compensation of that executive moving forward, and considers how he might adjust future compensation to ameliorate for current pay.

Further, when asked about Occidental's recent purchase of Phibro (or alternatively put, Citigroup's clever avoidance of the drama Andrew Hall's $100 million bonus would cause), Feinberg responded: "Go talk to Citigroup" and "[T]he result speaks for itself."

Feinberg also indicated that statutorily, his office does not have an expiration date and that: "We'll finish 2009 and we'll see where we go from there."

Although there is some indication that the business community is eager to see Feinberg's rulings released, potentially as a "blueprint" for acceptable executive compensation practices moving forward, there is also anecdotal evidence that companies are finding alternative methods of compensating senior executives (for instance, perks such as car service and driver, as well as personal tax and accounting services).

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