Kenneth Feinberg isn't being paid for the long hours he's putting in as the Treasury Department's special master to determine executive compensation at companies that received bailout money, but the decisions he's making are likely to percolate throughout the financial services industry for years to come.
Kenneth Feinberg isn't being paid for the long hours he's putting in as the Treasury Department's special master to determine executive compensation at companies that received bailout money, but the decisions he's making are likely to percolate throughout the financial services industry for years to come. The rulings on pay from the 64-year-old veteran lawyer with a disarmingly folksy manner are among the most profound reforms coming out of the financial crisis. But call Mr. Feinberg a “pay czar,” that most headline-friendly of phrases, and he demurs, explaining that his mission is anything but a power trip.
“This title is very, very unfortunate,” he said in a recent speech at the University of Maryland, “and my grandmother from Lithuania would be very confused.”
What Mr. Feinberg will do next year is continue to fulfill his congressional mandate to design compensation structures for the companies that received billions of dollars from the Troubled Asset Relief Program.
In October, he determined that the average compensation for the top 25 executives at each of these companies should be cut by 90%.
Now he's examining compensation packages for the next 75 managers at each firm.
He also has the discretion to decide when to attempt to recoup compensation already distributed among the hundreds of companies that took government money.
“That exercise should be very narrow and should be limited to egregious cases, which should be determined in the very near future,” Mr. Feinberg said last month.
His team's guiding principle, he said, is to focus not so much on dollars but on reversing the financial world's long-standing belief that its denizens are entitled to guaranteed salaries, bonuses, perquisites, commissions or any other form of compensation not tied to their performance.
“That's easier said than done,” Mr. Feinberg said, noting that he must try to reconcile the congressional dictate with contractual law and with good business practice.
He's aware, he insists, that financial firms need to retain key people to remain competitive and, more importantly, to thrive so they can return taxpayer money.
What's also clear, he said, is that libertarian arguments about the government's having no business in setting executive compensation no longer hold water. “I don't hear that argument much any more,” he said. “Congress has spoken.”
