All those thorny issues at Citigroup (C) and AIG (AIG)?
Obama’s man, the “Pay Czar” Kenneth Feinberg, is ready to come into town and set it all straight.
According to WSJ, Citigroup, AIG, Bank of America (BAC) GM, Chrysler, and GMAC have until August 13th to put together pay proposals regarding their top employees. Feinberg will judge, then, whether the pay they’re being offered is “too high”.
One of the first tests facing him Mr. Feinberg is what to do if Citigroup seeks to honour its profit-sharing contract with a top energy trader, Andrew J. Hall, that could pay out as much as $100 million for 2009. Mr. Hall, head of Citigroup’s energy-trading unit, Phibro LLC, and Citi are in talks about a possible divestment of Phibro, as previously reported. If that deal happens, the question of Mr. Hall’s pay might be moot.
It is unclear how Mr. Feinberg would rule on Mr. Hall’s case. Citigroup hasn’t yet submitted his or any other employee’s compensation package for review. If Mr. Feinberg deems Mr. Hall’s pay excessive, he would likely try to get Citigroup to lower the amount. If that isn’t possible, Mr. Feinberg might apply that $100 million towards Mr. Hall’s future earnings.
To some extent, Feinberg is tackling the least-important pay issues on Wall Street. Sure it’s unseemly to see big pay packages at Citi and AIG, but it is what it is. What’s more important and worrisome is the compensation at the other firms, for the rank and file, and whether a return to old practices guarantees a return to old risk. Alas, that’s not Feinberg’s purview.
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