Pay for the chief executives of AIG, Ally Financial and General Motors will remain frozen this year, the US Treasury said, after the bailed-out companies failed to sufficiently repay US taxpayers. The companies are the last of seven that received exceptional assistance at the height of the financial crisis.
While the other four—Bank of America, Citigroup, Chrysler Financial and Chrysler—have repaid their money AIG, Ally and GM have struggled to earn their way out of the government’s safety net.
As a result, remuneration for the top 25 executives at the three companies is subject to scrutiny by the US Treasury. GM, for example, had some of its requested pay increases rejected. The Treasury said that for certain executives the proposed increases “was not justified”.
The 2012 salary bill for the 69 top executives who remain at the three companies fell ten per cent from last year’s levels. The reduction is largely due to staff leaving and being replaced by people earning less rather than pay cuts. Twenty-one of the 69 are newcomers to the companies whose pay is 30 per cent lower than the 2011 remuneration of those who left.
At AIG, for instance, ten of the 25 highest-paid employees in 2011 have left the company. The companies each have said that the pay restrictions limited their ability to recruit and retain talent. The government pumped $68bn into AIG from the Troubled Asset Relief Program, or Tarp, and invested $50bn in GM and $17bn in Ally Financial to save them from collapse during the 2007-2009 crisis.
AIG owes the US Treasury $35.9bn, not including $3.9bn in losses the Treasury has already recorded. Ally owes $13.8bn. GM owes $23.4bn, excluding $3.9bn in realised Treasury losses, according to a Treasury statement dated Friday. Public anger over high pay and huge bonuses at bailed-out firms was so high that the Obama administration created a “special master’s office” to monitor pay practices.
The Treasury said on Friday that all three were making progress at repaying the taxpayer funds given to them to keep them from collapsing during the 2007-2009 financial crisis but their pay practices remain under scrutiny of a “special master” until they pay it back.
“Although there has been some modification in the mix of stock, salary and long-term restricted stock for the CEO group, the overall amount of CEO compensation is frozen at 2011 levels,” Treasury said. The Treasury report on Friday does not name any of the executives but it is evident the three CEOs still get pay that puts them among the elite of American income earners.
The top executive at AIG will receive total direct compensation, which includes cash, stock and future stock options worth $10.5 million, while Ally Financial’s leader will get $9.5 million and GM’s chief executive $9 million, according to documents distributed by the Treasury.
The chief executive officer of AIG is Robert Benmosche, GM’s CEO is Daniel Akerson and Ally Financial’s is Michael Carpenter, although their names do not appear in any of the documents that Treasury released. A spokesperson for Ally Financial said its executive pay “continues to be in line with the stated guidelines for Tarp companies” and said its management team was focused on repaying the remaining Tarp funds to Treasury.
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