Treasury Orders Executive Pay Cut

Granted, this may not be good news to everyone, but for most of us working stiffs — those of us who have had to shoulder the burden of the recession with layoffs, pay cuts, clothing allowance reductions and other unpleasant, un-American lifestyle alterations — this is a fantastic piece of news.

On Thursday, the Treasury Department ordered seven companies that received government bailouts to slash the salaries of their top executives by an average of 50 percent, reports the Associated Press. Yes! You read that right.

Treasury official Kenneth Feinberg said that the salaries for the top 25 executives are being cut by as much as 90 percent starting next month. The slash in pay will be felt by executives at Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial — all of whom were the happy recipients of TARP money.

While it may seem like sour grapes for us to be reveling in the misery of others, bear in mind that we're not talking about pay cuts that will cast these men and women (but let's face it, mostly men) out onto the street. More than 90 percent of affected workers will have their salaries capped at comfortable $500,000 — hardly what one could consider a hardship. On top of that, employees will also be able to enjoy an additional $25,000 in perks, such as company cars and jets, without approval from the Treasury. Beyond that, they'll need Feinberg's approval. (We can see the outstretched hands already. But I need that $10,000 escort service!!)

And don't forget about those loathsome bonuses. The new pay structure, which includes the cut in base pay, also includes new stipulations for different stock categories, some of which won't be redeemable for a set time period, thus attaching an incentive to long-term stock performance.

But where the Treasury failed the people in refusing to cap bonuses, which we all know is where financial execs make their most money. Citigroup, for example, despite a dismal year, is paying $5.3 billion in bonuses to its employees and Bank of America will dole out $3.3 billion in bonuses, according to the AP.

Of course, some corporations are handling the imposed pay restrictions better than others. B of A is being a big crybaby saying competitors are "identifying our top performers and using pay concerns to recruit them away," reports the AP. Wahhh!

Citigroup and GM are handling the news with a little more grace. Citigroup (AKA "Too big to fail") said it will "work to comply with the plan's requirements;" while GM said in a statement that it will shift its pay packages toward non-cash compensation tied to company performance, reports the AP.

The new requirements were established in response to tax payer outrage at having to foot the bill for executive extravagance. Feinberg started reviewing salaries in August and has been hashing out an agreement with the corporations in question ever since.

Executives will be subject to the salary limits as long as their companies receive money from the $700 billion bailout. Companies which have already paid back the Feds, including Goldman Sachs and JPMorgan are not subject to the plan

As the saying goes, there is no such thing as a free lunch — or a free bailout, for that matter. Now if we could only address those bonuses ...

Photo courtesy of Tim Pearce via Flickr.