I know I’m going to be accused of being a communist just for saying it but, really, the news that some employees have threatened to leave special relief companies (AIG particularly) because they couldn’t make it on a salary capped at $500,000, with potentially more than twice that in stock, is particularly emetic at a time when real earnings for almost every other employee in the country are in decline and unemployment stands at a 26-year high.
The news that 12 exemptions were made to this salary cap by Kenneth Feinberg, the Pay Czar, in his latest pronouncements on pay doesn’t do much to keep the bile down either.
The letter to AIG is a good enough example of those Mr. Feinberg sent out to AIG, Citigroup, General Motors, and GMAC which set the pay rates and structure for employees numbered 26 to 100. The compensation design follows much the same path as that outlined for employees one to 25. I already blogged about this here and here. Cash salary, stock salary, incentive stock seems to make up the packages for all of these employees too, with the stock having a potentially huge upside potential. This could all have been avoided with the judicious use of premium-priced stock options, but it’s probably too late now.
Paul Hodgson - Senior Research Associate
