7 companies to report pay for executives

WASHINGTON (AP) — Seven companies on government life support — bailout recipients such as General Motors and Citigroup — face a deadline today to propose compensation packages for their highest-paid employees, which will have to get the thumbs-up from the Obama administration’s “pay czar.”

It’s the first time a federal official will have veto power over the how much private-sector executives are compensated. Some fear this new power encroaches on the free market, but Congress decided the government should have a say when it comes to the companies relying most heavily on taxpayer money.

How will the pay restrictions work? Here are some questions and answers.

Q. Who’s running the show?

A. The administration’s pay czar — technically called the Special Master for TARP Executive Compensation — is Kenneth Feinberg, 64, a high-profile lawyer and mediator. Feinberg is best known for running the government’s fund for families of 9/11 victims.

Q. How did that go?

A. That job got off to a bumpy start. Initially, some 9/11 victims’ relatives accused Feinberg of being arrogant and distant.

As the program continued, Feinberg won over many of his critics and garnered praise as a pragmatic mediator.

Q. What has Feinberg done so far?

A. Feinberg has been consulting with the seven companies that have received “exceptional assistance” from the government. They are: American International Group Inc., Bank of America Corp., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial.

Q. So what happens today?

A. Today is the last day the companies can submit proposed pay packages for the 25 highest earners at each one. At least one company, General Motors, said Tuesday it already had submitted its plan.

Q. What’s next?

A. Feinberg has 60 days to review the proposals, then accept or reject them. He is expected to meet and negotiate with the companies during this period. He also will approve broader compensation formulas that will apply to the 75 next-highest-paid workers at each company.

Q. Why can’t he just set a very low cap on all the executives’ salaries, to protect taxpayer money?

A. The companies argue that if they can’t pay competitive wages to their best employees, they will lose them to other employers.

A bank’s best-paid employees are compensated based on the revenue they produce, and many make millions for their companies. If banks lose their best people, that could put a major dent in their profits, making it harder for them to recover and repay the government’s money.

Q. How much will Feinberg make to tell others how much they can earn?

A. As with his work on the 9/11 fund, Feinberg is serving as pay czar pro bono.