Pressure from financial institutions and Treasury officials undermined an effort to limit executive pay at seven companies rescued with taxpayer money, a new government audit showed on Tuesday.
The official overseeing executive pay for bailout firms limited cash compensation and made some reductions in pay, but still approved compensation packages in the millions, the TARP (Troubled Asset Relief Program) inspector general said in the report.
Former U.S. pay czar Kenneth Feinberg approved pay packages worth $5 million or more from 2009 to 2011 for 49 top earners, the report said.
"Special Master Feinberg said the companies pressured him to let the companies pay executives enough to keep them from quitting, and that Treasury officials pressured him to let the companies pay executives enough to keep the companies competitive and on track to repay TARP funds," the report said.
Public anger over high pay and billion-dollar bonuses at bailed-out firms in 2008 prompted the Obama administration to limit cash salaries at $500,000 and approve compensation packages for the companies' top earners.
The report said the companies had "significant leverage" over Feinberg in negotiating for excessive pay packages based on historical pay, warning that if he did not provide competitive pay packages, top officials would leave and go elsewhere.
"Rather than view their compensation through the lens of partial government ownership, the companies argued that their proposed pay packages were necessary to retain or attract employees who were crucial to the company," the report said.
The companies affected were: AIG, Bank of America, Citigroup, Chrysler Financial Services, Chrysler Holding, General Motors, and Ally (formerly GMAC).
The report evaluating how the pay packages were set suggested a need for a more uniform standard for compensation decisions.
It recommended that each request to exceed the $500,000 pay limit be justified and that new guidelines be put in place to ensure the decision process is evenhanded.
In Treasury's response, Acting Special Master, Patricia Geoghegan, said her office had cut average cash compensation for the top 25 executives at the seven companies that received "exceptional" TARP assistance by more than 90 percent.
"Our office was effective at limiting compensation at the seven companies over which it had authority, while ensuring the companies were well-positioned to pay back the taxpayers' investments," Geoghegan wrote.
She noted that Bank of America, Citigroup, Chrysler Financial and Chrysler had exited TARP and that Ally, AIG and GM were in the process of exiting the program.
The TARP audit was conducted between November 2009 and December 2011.