Fed & Treasury Pitch Pay Rules, But Will They Work?

The Fed and Treasury had a huge impact by unveiling a sweeping compensation rules that apply to executives at banks and other financial companies. The treasury has rules that apply to seven companies that have gotten an extraordinary taxpayer aid. These companies include AIG, Bank of America, GM and Chrysler to name a few. The Fed takes their proposals and they consider formalizing them after a 30-day comment period. This will tell the bank holding companies just how the agency intends to assess their pay practices. Kenneth Feinberg has a policy to pay only for the top five executives and the 20 highest paid employees at each of the firms. This will result in various government bailouts. The main focus is on swapping big chunks of cash in salary for stock and replacing annual bonuses with restricted stock. In Feinbergs words “salarized” shares belong to executives immediately but they can only cash it out over the course of three years. In the article they say the better approach would have been to fine tune each executives pay package to his duties mainly for the ones responsible for specific business unites instead of the firm as a whole.