U.S. unveils new rules to slash executive compensation

WASHINGTON, Oct. 22 (Xinhua) -- The U.S. Treasury and the Federal Reserve on Thursday unveiled a set of rules to slash excessive executive compensation in a move to comfort the furor over executive pay at companies bailed out with taxpayer money.

ROLE OF PAY CZAR

According to the order released by the Treasury Department, seven firms that received the most federal aid, namely Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial, will be forced to slash their compensation to 175 highest-paid employees.

The cuts will apply to the 25 top earners at seven companies, with on average cut total compensation this ear by about 50 percent. Meanwhile, the cash salary for affected executives will go down by an average of 90 percent.

Any executive seeking over 25,000 dollars in special perks, such as private planes, limos, company cars or country club memberships, would have to receive particular scrutiny.

The seven firms have received a total of about 250 billion dollars in bailout funds from the Troubled Assets Relief Program (TARP), which was approved by the Congress last year. Other companies and those that have repaid the bailout money, including Goldman Sachs Group Inc. and JPMorgan Chase & Co., are not affected by the plan.

The decision was made by Kenneth Feinberg, the special master at Treasury appointed to handle compensation issues as part of the government's 700 billion financial bailout package.

According to the plan, the form of the pay will be changed to align the personal interest of the executives with the longer-term financial health of the firms.

Feinberg, the so-called U.S. pay czar, said that the government did not want to make executives return compensation already received this year, but the reduced pay levels will be the base for making decisions on salary in 2010.

Treasury Secretary Timothy Geithner praised Feinberg's efforts." Ken Feinberg has done a commendable job of applying the strong compensation standards of the Congressional legislation to the companies that received exceptional assistance from the government," he said in a statement.

"We gave him the difficult task of cutting excessive pay, striking a balance between compensation and risk taking, and keeping strong management teams in place to help the companies recover -- all in the public interest," said Geithner.

"We all share an interest in seeing these companies return taxpayer dollars as soon as possible, and Ken today has helped bring that day a little bit closer," he added.