Yesterday, the U.S. Treasury unveiled its plan to slash salaries of the top 25 executives at each of the seven companies that received a government bailout, including Chrysler Group, Chrysler Financial, General Motors, and GMAC.
In most cases, executive salaries will be no more than $500,000 annually, according to the decision by Kenneth Feinberg, the U.S. Treasury worker overseeing the pay reductions. Auto executives’ pay cuts will be lower than those witnessed at the financial institutions simply because the banking executives earn a much higher salary.
At Chrysler, the executive salaries follow the $500,000 cap. CEO Sergio Marchionne is unaffected by this decision, as he does not receive pay from Chrysler and is paid only by Fiat. Chrysler Financial executives will see their pay drop by 30 percent and total compensation will fall by 56 percent. The financial institution is in the process of liquidation and will close its doors by the end of 2011.
Fritz Henderson, GM’s CEO, will earn more than most at $950,000 — a reduction of about 25 percent from his previous salary of $1.26 million per year. Henderson’s long-term stock compensation will also be reduced to $1.8 million, but he will only be eligible to exercise said option after GM repays its government loans. Before the pay cuts were introduced, Henderson may have earned up to $5.45 million.
For the rest of GM’s executives, their salaries will fall by 31 percent, with only one other executive at GM earning over $500,000 per year. Total executive compensation fell by 20.4 percent. At GM’s financial arm, GMAC, executives’ salaries were trimmed by 50 percent and total compensation was slashed by 86 percent. GMAC executives’ compensation will now be 15 percent in cash and the remainder in stock options.
Other changes to the executive culture at the companies that received bailouts are the termination of golf memberships, the use of private planes, retention awards, or guaranteed bonuses. Feinberg will also be keeping an eye on executive perks worth over $25,000 annually.
Source: The Detroit News