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US freezes salaries of chief executives of bailed-out companies

AIG, General Motors and Ally Financial haven’t yet repaid the financial aid given in 2008 – so the Treasury is freezing their pay.

AIG chief executive Robert Benmosche (right) has had his salary frozen - but his total package is still worth around $10.5 million.
AIG chief executive Robert Benmosche (right) has had his salary frozen - but his total package is still worth around $10.5 million.
Image: Pablo Martinez Monsivais/AP

THE US TREASURY has confirmed it has frozen the salaries of the chief executives of three major companies which have yet to repay the financial aid given to them by the government four years ago.

The chief executives of AIG, Ally Financial Company (previously known as GMAC) and General Motors will have their salaries frozen at last year’s levels as a result of the move.

The US government gained the power to freeze the salaries of companies still participating in the ‘TARP’ programme in 2009, as part of the legislative catch-up to the government’s major bailout of some of the country’s largest firms.

Another four firms which were bailed out in that programme – Bank of America, Citigroup, Chrysler and its Chrysler Financial offshoot – have already repaid the aid given to them, and are not subject to the same conditions.

The Treasury said that although it had allowed “some modification” in the make-up of an executive’s salary – potentially allowing companies to increase the pay for their CEOs as long as their stock options or pension contributions were cut accordingly – the overall packages would be fixed.

“Most pay (83 per cent overall in 2012), including target incentives, is in the form of stock,” the Treasury noted, saying this meant chief executives were eventually rewarded based on company performance.

In order to give managers an incentive to improve their company performance, the cash portion of the CEO’s salary is limited to $500,000 (€381,000), or less in some cases.

By comparison, the Irish government’s guidelines on the pay for chief executives includes a cash limit of €500,000 ($655,000), which can be added to by pension provisions.

A breakdown of the figures provided for the three US chief executives, however, indicates that the top package for the chief executive of AIG, Robert Benmosche, is still worth a total of $10.5 million when including stock and future stock options.

The 2009 laws were introduced after public outcry over the bonuses paid to the chief executives of companies who were saved from insolvency by major government loan packages.

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Gavan Reilly

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