Federal officials cut pay for top executives by more than half at institutions receiving "exceptional" government assistance during the financial crisis, but ultimately did little to affect the way corporate America pays its top talent, a federal panel said Thursday.
"What seemed an opportunity for sweeping reform now appears likely to leave a far more modest legacy," said former Delaware Sen. Ted Kaufman, chairman of the Congressional Oversight Panel.
The panel was formed to watch over the Troubled Asset Relief Program, or TARP, the federal government's $700 billion corporate bailout.
In a report released Thursday, the panel detailed executive compensation at American International Group Inc., Bank of America Corp., Citigroup Inc., Chrysler Group LLC, Chrysler Financial, General Motors Co., and Ally Financial Inc., formerly known as GMAC Financial Services Inc.
AIG, Chrysler, GM and Ally salaries still fall under Treasury supervision.
The Treasury Department's Special Master for Executive Compensation managed sharp cuts to overall compensation at the firms--an average decrease in overall compensation of 54.8% for the 25 highest-paid employees at each company from 2008 to 2009, the report said.
But the congressional panel raised concerns that by shifting companies away from guaranteed pay toward stock-based compensation, Treasury may have encouraged unnecessary risks. And it also questioned "one size fits all" pay packages across the seven companies.
Perhaps most troubling, the report said, Treasury didn't disclose how it weighed different factors when determining salary, leaving little in the way of a model for the public or the private sector.
"Wall Street pay is rebounding to record highs, and experts judge the Special Master's influence as minimal. To the extent that greater transparency and clearer explanations could have influenced Wall Street, the Special Master's work represents a missed opportunity," Kaufman said.
The Treasury Department said it followed compensation guidelines set out by Congress, and cut salaries while working to ensure that taxpayers were repaid TARP funds.
"Treasury welcomes the fundamental questions raised by the report as to what types of reforms are needed to compensation structures generally to avoid excessive risk taking," said Treasury's Acting Assistant Secretary for Financial Stability Tim Massad.
Executive pay remains in the spotlight in Washington.
This week, the Federal Deposit Insurance Corp.'s five-member board unanimously approved a draft rule, written jointly with six other regulators, that would require large financial firms to hold on to at least half of top executives' bonuses for three years or longer.
The deferral requirement, if approved, would apply to firms with $50 billion or more in assets, such as Morgan Stanley, Goldman Sachs Group Inc., and mortgage-finance giants Fannie Mae and Freddie Mac.
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