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136 top US executives told to reduce pay packet by 50 percent

By Arun Kumar, IANS,

Washington : President Barack Obama’s ‘pay czar’ has slashed compensation of 136 top executives at seven biggest bailed-out companies, including Citigroup led by Indian American chief executive Vikram Pandit.

White House ‘pay czar’ Kenneth Feinberg demanded that each of the bailed-out companies – AIG, Citigorup, Bank of America, General Motors, its former finance arm GMAC, as well as Chrysler and Chrysler Financial – reduce total compensation for their top 25 highest-paid employee by 50 percdent on average.

Much of the cutting was done to executives’ salaries, which were reduced more than 90 percdent on average. The pay restrictions announced Thursday will not take effect until Nov 1, and will serve as a base for executive pay in 2010.

On a company basis, the 22 executives at Citigroup stand to receive the biggest pay packages among the seven firms, collecting pay packages worth an estimated $118.4 million after taking into account salary, options and restricted stock and options that will vest over the next four years.

Feinberg said competitive concerns and public outrage both played a role in how he reworked pay contracts at the five financial firms , but he assured he will not claw back payments already made.

“I’m not going to go back and ask everybody to repay what they’ve already earned,” Feinberg said.

Obama, who appointed Feinberg to assess compensation practices at these seven companies in June, said his czar’s actions would help curb risk-taking, while still allowing the firms to prosper.

“I believe he’s taken an important step forward today in curbing the influence of executive compensation on Wall Street while still allowing these companies to succeed and prosper,” he said at a White House event.

“We don’t disparage wealth, we don’t begrudge anybody for doing well, we believe in success,” Obama said.

“But it does offend our values when executives of big financial firms – firms that are struggling – pay themselves huge bonuses even as they continue to rely on taxpayer assistance to stay afloat.”

Separately, the Federal Reserve Thursday proposed a review of pay practices at 28 of the nation’s largest banks to make sure employees are not tempted to make the kinds of risky bets that helped sink firms such as Lehman Brothers.

The Fed oversees more than 5,000 bank holding companies and over 800 smaller state-chartered banks.

“Banking organizations too often rewarded employees for increasing the firm’s revenue or short-term profit without adequate recognition of the risks the employees’ activities posed to the firm,” the US central bank said.