During the midst of the recession in the past few years, a lot of people were angry that large bonuses were being paid to executives whose companies were getting taxpayer-funded bailouts. The rage was seemingly justified, as the Treasury has been found to have approved lavish executive compensation.
Treasury green-lit lavish executive compensation during bailouts
The Troubled Asset Relief Program was never that popular with a large contingent of the American Public. While millions lost houses, careers and nest eggs to foreclosure, layoffs and market fluctuations, the parties responsible for doing much of the damage were “bailed out” by the taxpayers as the government agreed to pick up their tab. Loudest among criticisms were over executive bonuses; why should failure be rewarded and with taxpayer funds, no less?
However, it has come to light that the Treasury Department didn’t have much of a problem with lavish executive compensation, less a few scapegoats. According to the Wall Street Journal, it has been discovered that almost 40 executive compensation packages of $3 million or more were directly approved by the government’s accounting division, of which 16 received $5 million or more in 2012.
Outrage is phony, pay the crony
The Special Inspector General for TARP, Christy Romero, recently released a report detailing approved compensation packages that were approved directly by the Treasury. Heavy criticism is being leveled at Patricia Geoghegan, the person appointed to oversee bonuses and salaries at firms that received TARP funds.
The companies that were the targets of perhaps the most criticism were also those that received much of the executive compensation, or rather the pay packages most likely to cause a stir, namely General Motors, Ally Financial and AIG.
During the most active times for TARP, between 2007 and 2012, much of the federal government, including Congress and the White House, ordered salaries capped, though variances could be granted.
Initially, it was ordered that TARP-funded companies have a hard limit of $450,000 in cash in executive compensation packages. Of the sixteen employees that received $5 million-plus bonuses during 2012, three were at General Motors, four with Ally and nine worked for AIG. Top executives who didn’t breach the $500,000 barrier still cleaned up, as, according to the Washington Post, 65 of the 69 senior employees at those three companies received at least $450,000 in cash as part of salary, nearly 10 times the national median household income. Household – not individual.
Dan Akerson, CEO of GM received $1.7 million in cash and $7.3 million worth of stock in 2012.
Those 16 top employees pulled a collective $6.2 million in raises, which the government’s “bonus czar,” Patricia Geoghegan, signed off on.
Sake of retention
All told, seven companies received dispensation for larger pay packages between 2009 and 2011. In many cases, it was asserted that executive compensation among TARP-funded firms had to be kept high in order to “retain” or recruit top executives. Geoghegan alleges the report “mischaracterizes” and is inaccurate.