NEW YORK/WASHINGTON (Reuters) - Wall Street salaries have become everybody’s business lately, but the Obama administration’s pay czar may try to keep under wraps a large portion of the compensation plans he is reviewing.
Kenneth Feinberg has said he is uncertain how much information will be made public. Privacy laws and fears that highly compensated executives will become targets for populist anger argue for limiting such disclosure.
Feinberg, speaking on Martha’s Vineyard on August 16 in his only public remarks since becoming President Obama’s point-man on executive pay, called the issue of disclosure “a serious problem.”
“There is a tension between not wanting to put on the front page of every newspaper in the country the specific compensation packages of these individuals ... versus the public’s right to know,” he said.
Seven major companies still entangled in the government’s Troubled Asset Relief Program — including Citigroup Inc (C.N), American International Group Inc (AIG.N), Bank of America Corp (BAC.N) and General Motors Co — have submitted proposed compensation plans for their 25 highest-paid employees. Feinberg is reviewing the proposals.
As of now, the Treasury Department does not expect to make public information that would identify individual employees. It has said it will publish final determinations on pay packages in compliance with the Privacy Act, a federal law limiting disclosure of personal information.
Reuters last Wednesday submitted a request under freedom-of-information laws to review the pay proposals submitted by the seven companies. The Treasury has yet to respond.
Steven Eckhaus, a New York executive compensation attorney who represents executives on the lists submitted to the pay czar, said his clients have concerns about disclosure.
“One of my clients makes $25 million a year and drives a Honda,” said Eckhaus, of Katten Muchin Rosenman LLP. “He tries to lead a fairly modest life and he would be horrified if what he makes appeared in the paper. Not only would his neighbors know, but his kids would know, and it would affect his ability to raise his kids. These are people, not a circus sideshow.”
Douglas Elliott, a former JPMorgan investment banker now with the Brookings Institution think tank in Washington, said releasing names and salaries of top executives could be intrusive and would not serve a public good.
“When you turn it into specific names, it’s kind of voyeurism,” Elliott said. “It’s not the principles anymore, and I think it does violate their privacy.”
He also said too much disclosure could prompt top executives to resign, harming companies as they try to recover and repay the government.
An intense emotional response to pay was on full display in March, when the public balked at $165 million in bonuses being paid to employees at the AIG unit largely responsible for the firm’s needing more than $180 billion from the government.
The issue sparked criticism of Treasury Secretary Timothy Geithner and prompted left-leaning groups to organize bus tours to visit the homes of AIG employees.
Democratic Representative Alan Grayson hammered Edward Liddy, AIG’s chief executive at the time, demanding the names of employees receiving the bonuses. Liddy demurred, saying releasing the names could provide ammunition to “individuals who want to do damage to them.”
Grayson told Reuters he is unsympathetic to the argument that the pay czar should not name names.
“If this is the same top talent that caused their firms to be destroyed and put the entire U.S. economy at risk, I wish they would leave the firms and leave the country,” he said.
As Feinberg handles the hot-potato pay issue, he’ll continue to face both a drum beat of public pressure in favor of wide disclosure and pleas for privacy.
“We are going to come up with a way, which we will, that will balance some of those conflicting objectives,” he said.
Reporting by Steve Eder in New York and Karey Wutkowski in Washington; editing by John Wallace