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Treasury Freezes CEO Pays At GM, AIG, Ally Financial

 April 07, 2012 02:40 PM

Treasury ImageU.S. Treasury has frozen the pay packages of Chief Executives at General Motors (NYSE:GM), Ally Financial and American International Group, Inc. (NYSE:AIG) continuously for the second year as these companies got "exceptional" Troubled Asset Relief Program (TARP) assistance.

The Troubled Asset Relief Program (TARP) is a program of the United States government to bailout key corporations that are considered too big to fail. Under this program, the government instilled funds in companies and purchase assets and equity to strengthen their balance sheets in the subprime mortgage crisis.

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However, there have been intense public backlash over using taxpayer money to bailout companies and offering huge pay packets to its top executives including CEO. As a result, the Obama administration created a "special master's office" to monitor pay practices of these TARP bailed out institutions.

The Treasury said that although there has been some modification in the mix of salary and long-term restricted stock for the CEO group, the overall CEO compensation is frozen at 2011 levels.

In other words, the CEO compensation packages payable by AIG, Ally Financial and GM have not increased. Indeed the cash compensation for 69 individuals employed in these three firms, decreased 18 percent and their total direct compensation dropped 10 percent from 2011 levels.

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For individuals in the "top 25" in both 2011 and 2012, cash compensation increased 1 percent, while the total direct compensation fell 2 percent. For the individuals new to the "top 25" group for 2012, cash compensation declined 47 percent from 2011, and total direct compensation decreased 30 percent from last year.

As in the prior determinations, most pay, including target incentives, is in the form of stock, tying the absolute value of compensation to company performance. Transferability of the stock remains subject to deferral over a period of three years, and hedging of the stock compensation remains prohibited. Bonuses are subject to claw back.

Meanwhile, cash salary continues to be limited—in most cases to $500,000 or less and the $25,000 cap on perquisites continues to apply.

Despite these restrictions, the top executives of these firms, believed to be the CEOs, would receive a decent compensation, which includes cash, stock and stock options, and they would still be in the list of top earners in the U.S.

GM is being led by Daniel Akerson, AIG is run by Robert Benmosche and Michael Carpenter is the Chief Executive of Ally Financial, formerly GMAC.

The documents from Treasury shows that the top executive of GM, AIG and Ally Financial would earn $9 million, $10.5 million and $9.5 million, respectively, in 2012.

Meanwhile, the Treasury has recovered significant portion of TARP funds invested in these companies as AIG has cut down its obligations to U.S. government by 75 percent, GM paid nearly half the money owed to Treasury and Ally Financial repaid nearly one-third of its TARP funds. In addition, Bank of America Corp. (NYSE:BAC), Citigroup, Inc. (NYSE:C), Chrysler Financial, and Chrysler have already exited TARP.



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