Troubled Asset Relief Program special inspector general Christy Romero had some harsh words for the U.S. Treasury Department, reports Automotive News. Romero called out the Treasury for what she claims were irresponsible approvals of “excessive” automotive and banking executive pay raises, particularly for executives who worked at companies that received large government bailouts.
Getting more than their share of executive pay raises
Romero, who oversees the $700 billion TARP program, was particularly critical of the Treasury Department’s decisions to issue executive pay raises at General Motors, Ally Financial and American International Group (AIG). The report issued Monday criticized the choices of the Treasury’s special master Patricia Geoghegan, whose job it was to oversee such compensation. In total, cash salaries of $450,000 or more were approved for 94 percent of the top 25 employees at each of the “big bailout three” companies.
“While taxpayers struggle to overcome the recent financial crisis and look to the U.S. government to put a lid on compensation for executives of firms whose missteps nearly crippled the U.S. financial system, the U.S. Department of the Treasury continues to allow excessive executive pay,” writes Romero. “(Executives) continue to rake in Treasury-approved multimillion-dollar pay packages that often exceed guidelines.”
AIG repaid its government debt in December and is not longer bound by pay restrictions. When TARP was first formed, seven companies, including Chrysler Group LLC, Chrysler Financial Citigroup Inc. and Bank of America – were under the restrictions.
More executive pay up front
One of Geoghegan’s more controversial decisions was to shift more executive pay away from long-term incentives into upfront salary. Long-term restricted stock was removed for senior executives, replaced largely by stock salary as the companies requested. She also approved pay packages in excess of $5 million or more annually for 23 percent of the top 25 employees at AIG, GM and Ally. All 18 approved executive pay raises – $6.2 million added in total – were raises companies requested from the Treasury Department. Half of the raises were given to GM executives.
In response to some of the criticism, Geoghegan sent a letter to Romero, exclaiming that the compensation authorized enables the companies to “remain competitive.”
“We will review whether there are additional ways to improve our processes,” wrote Geoghegan.
[Find out more about car loans at Car Deal Expert.]