Who Gets What by Kenneth R. Feinberg

Author:Kenneth R. Feinberg [Feinberg, Kenneth R.]
Language: eng
Format: epub
ISBN: 9781610390767
Published: 2012-05-09T16:00:00+00:00

In the end, General Motors and Chrysler, and their financing arms, GMAC and Chrysler Financial, did not prove to be much of a problem. Struggling to survive (GM had just completed its bankruptcy reorganization and Chrysler Financial was planning to close its doors), these four companies could not afford to present compensation packages that raised eyebrows. So fixing compensation for the auto industry and its financial partners was relatively simple and straightforward. Everybody (other than the CEO or CFO) received total all-in compensation packages well under $1 million per year, with few financial perks and little in the way of long-term stock. If my pay determinations for the auto industry were not exactly aligned with Main Street, they were unlikely to trigger an angry response from a public focused on Wall Street excesses.

The special master’s 2009 and 2010 compensation determinations for the four auto industry companies were announced with little fanfare and even less commotion. The public and Congress did not seem to care. They had their eyes on a different prize—the financial services industry represented by AIG, Bank of America, and Citigroup—especially after my office released figures showing that the top three corporate officials at both Citigroup and Bank of America were requesting more annual compensation than the combined pay packages of all twenty-five individuals at GM or Chrysler.

The three financial giants each took a different tack when it came to dealing with the special master.

Citigroup was the easiest, primarily because all of our negotiations were with Lewis Kaden, a company lawyer and vice president with a healthy dose of political savvy and experience. I had known Kaden for twenty years and our relationship was grounded in mutual respect and admiration. Kaden realized that doing battle with the special master made little political or substantive sense; at the end of the day I would be making the ultimate compensation decisions. So, Kaden and Citigroup decided to pursue a sensible course of action based on the realities of the moment: offer sensible compensation proposals, negotiate the best deal possible, and ultimately accept the results as inevitable.

This strategy was immediately put to the test when it came to Andrew J. Hall and PHIBRO, a Citigroup subsidiary energy trading unit. Hall had a contract with Citigroup entitling him to receive more than $95 million in bonus compensation! This was far and away the biggest such package I had to handle. (A second executive was pegged to receive more than $30 million.) Meeting with Kaden in New York City, I warned him that there was no way I would approve such compensation: “I don’t care if Hall has a binding contract written in stone. He can go to court to try and get it. He won’t get $95 million on my watch. Talk about compensation based on taking ‘excessive risk.’ Anybody receiving a bonus of $95 million must be engaged in risky transactions. Hall is the poster child showing how pay promotes risk. Congress will schedule a ten-camera hearing with Hall being the featured witness.

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