- James I. Clark III
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Czar Kenneth Feinberg Wants Across-the-Board Executive Pay Cuts
Compensation czar Kenneth Feinberg – officially, the Obama administration’s special master for executive compensation – believes that the pay reductions he mandated at seven taxpayer-rescued firms should become the model for Wall Street and corporate America.
“There is entirely too much reliance on cash and there’s got to be a better way to tie corporate performance to long-term growth,” Feinberg said. “I’m hoping that the methodology we developed to determine compensation for these individuals might be voluntarily adopted elsewhere.” The Obama administration is holding unregulated risk-taking fueled by excessive pay partially responsible for the financial crisis, which has caused $1.6 trillion in losses and write-downs globally, as well as 7,200,000 jobs in the United States. Between Feinberg’s ruling and Federal Reserve guidelines for banker compensation, the government has inserted itself directly into decisions normally made by corporate boards.
Feinberg has restructured cash “guarantees” into stock that the recipients must hold over the “long term”, according to a statement from the Treasury Department. “Guaranteed minimum amounts give employees little downside risk in the event of poor performance – but upside when times are good.”
Meanwhile, the Federal Reserve has proposed new guidelines on pay practices at that nation’s banks and plans to review the 28 biggest firms to assure that compensation packages don’t create incentives that lead to the risky investments that caused the worst financial crisis in 70 years.