'Pay Czar' Feinberg And Fed Move Forward On Executive Compensation Plans

WASHINGTON (AP) — The government's "pay czar" expects compensation plans for additional employees at the seven companies getting the biggest bailouts to be in place by year's end, while the Federal Reserve will soon start its own work on banks' pay practices.

Kenneth Feinberg, the Treasury Department official overseeing compensation at the seven bailed-out companies, said Monday that he hopes "to come up with consensual plans" for highly paid employees beyond the top 25 at each firm.

Feinberg already has announced plans to slash pay for the top 25 executives at the seven companies: Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors Co., GMAC, Chrysler and Chrysler Financial. Now he is working on designing compensation structures for 75 additional employees at each one, ranking 26 through 100.

For those executives, Feinberg intends to set up a general plan within six weeks to govern their 2009 pay, he said in a speech at a conference on executive pay organized by the University of Maryland's Robert H. Smith School of Business.

Then comes the next goal: A program for 2010 compensation packages for the top 25 executives at the seven companies, hopefully within the first quarter of the year, Feinberg said.

The Federal Reserve, meanwhile, will soon begin work to get a broad picture of U.S. banks' pay practices, part of a larger effort to crack down on plans that encourage irresponsible risk-taking by employees, a Fed official told the conference.

Fed Governor Daniel Tarullo, the central bank's point man on the issue, said the Fed plans to "commence shortly" a so-called "horizontal" review to compare and contrast information across the nation's biggest banks. Supervisors at the Fed's regional banks, staff at the Fed's headquarters in Washington and other financial regulators will take part in the review.

Fed officials previously have said they don't anticipate making the results of such a review public, unlike "stress" tests conducted earlier this year to determine how big banks would fare if the economy were to take a turn for the worse.

Tarullo's remarks came as the Fed supervisors met Monday with executives of the top 28 U.S. banks to discuss the Fed's compensation initiative.

"In discussions across the country, we are communicating our plans and expectations to these firms, with particular attention to beginning this information gathering," Tarullo said.

The goal is to ensure that banks integrate their pay practices "completely" into their schemes for managing risk, he said in response to a question. The Fed's work eventually will be coordinated with other federal bank regulators.

Under the Fed plan, the 28 biggest banks — including Citigroup, Bank of America and Wells Fargo&Co. — will develop their own plans to make sure compensation doesn't spur undue risk taking. If the Fed approves, the plan would be adopted and bank supervisors would monitor compliance.

At smaller banks — where compensation is typically smaller — Fed supervisors will conduct reviews. Those banks don't have to submit plans.