WASHINGTON -- The Obama administration
plans to appoint a "Special Master for Compensation" to ensure that
companies receiving federal bailout funds are abiding by executive-pay
guidelines, according to people familiar with the matter.
Kenneth Feinberg, who
oversaw payouts to 9/11 victims, will keep tabs on executive pay at
companies in bailout.
The administration is expected to name
Kenneth Feinberg, who oversaw the federal government's compensation fund
for victims of the Sept. 11, 2001, terrorist attacks, to act as a pay czar
for the Treasury Department, these people said.
Mr. Feinberg's appointment could be
announced as early as next week, when the administration is expected to
release executive-compensation guidelines for firms receiving aid from the
$700 billion Troubled Asset Relief Program. Those companies, which include
banks, insurers and auto makers, are subject to a host of compensation
restrictions imposed by the Bush and Obama administrations and by
Wall Street has been anxiously awaiting
more details on how the rules will be applied. "The law is confusing and a
bit ambiguous, and so we're looking for certainty as to how to structure
pay incentives," said Scott Talbott, senior vice president of government
affairs for the Financial Services Roundtable, a trade association.
The move comes amid a series of
sometimes-overlapping efforts to curb pay at financial firms following
perceived industry excesses that led to the lending boom and bust.
The Obama administration earlier this year
issued guidelines that include limiting salary for top executives at some
firms receiving TARP funds and requiring that additional pay be in the
form of restricted stock, vesting only after the company repays its debt,
with interest, to the government. Congress then chimed in with even
tougher rules curbing bonuses for top earners at firms receiving TARP
money. As part of that effort, lawmakers barred those firms from paying
top earners bonuses that equal more than a third of their total
The White House has been wrestling with how
to marry those two efforts, which in combination are more punitive than
administration officials had intended.
The government is also pursuing a separate
revamping of financial-sector rules that could change industry
compensation practices more broadly. For instance, the Federal Reserve is
considering rules that would curb banks' ability to pay employees in a way
that would threaten the "safety and soundness" of the bank.
Mr. Feinberg is expected to focus on pay
restrictions related to firms receiving TARP bailout funds, helping
companies to interpret the rules and ensure that they are being followed.
For instance, companies have been confused
about whether to pay 2008 bonuses, since restrictions on incentive pay
didn't go into effect until early 2009. Some firms have made the payments
while others have held off. Many firms are also unsure whether the "top
earners" targeted by Congress include rank-and-file employees or just
Mr. Feinberg will report to Treasury
Secretary Timothy Geithner, but he is expected to have wide discretion on
how the rules should be interpreted. Firms likely won't be able to appeal
decisions that Mr. Feinberg makes to Mr. Geithner, according to people
familiar with the matter.
Mr. Feinberg, founder and managing partner
of the law firm Feinberg Rozen LLP, spent several years overseeing payouts
totaling more than $7 billion to victims of the 9/11 attacks. He
personally reviewed every claim, approving or denying awards and
allocating sums to be paid out of the Treasury.
Write to Deborah Solomon
Printed in The
Wall Street Journal, page A2