Summary
Obama’s administration should not have to micro-manage the financial institution, such as AIG, Citi, which received tarp money. However, the administration is correct in letting Kenneth Feinberg, U.S. Treasury Department, handle this issue concerning misappropriation of funds.
The government should have given tarp money with strict restrictions on use of funds: (i) increase cash reserves level, (ii) reduce debt, and (iii) spend on capital investments.
The government should have given tarp money with strict restrictions on use of funds: (i) increase cash reserves level, (ii) reduce debt, and (iii) spend on capital investments.
Analysis
Feinberg’s proposed executive pay rules
1. Cash Salary cap: part of cash salary will be in stock which are redeemable at a set future date (maximum: one-third of salary)
2. Bonus: to be paid in company stock shares and is not redeemable until Tarp money from government is paid in full.
3. Supplemental Executive Retirement Plans: redesign SERP’s executive pension plan by reducing and placing a cap.
The new proposed guidelines/restrictions on executive compensation for financial institutions, such as AIG, Citi, and possibly Wall Street company executives by Feinberg (salary, bonus, and pension) may create a debatable argument.
Pros
· Reduce risky behavior on decision-making practices
· Across the board compensation within industry/sector
· Set new industry standard on executive pay
Cons
· Executive retention and attracting new talent
· Executive compensation gauged using all three criteria: individual, company, and economic performance.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
