The Obama administration's "pay czar" who reduced pay for executives at seven major corporations does not want broader powers over the rest of the U.S. financial sector.
"I am troubled at the notion that it could be expanded," Kenneth Feinberg said Wednesday of his role overseeing pay at the largest recipients of government bailouts. "That is a mistake."
But Feinberg, who ordered cutting top executive compensation at the seven companies in half, told a congressional committee that the standards he used should guide the broader marketplace.
"I'm hoping that the report that I issued and the recommendations that I made as to these seven companies will have some effect, voluntarily, in influencing how the private sector goes about establishing compensation practices," he said.
His testimony comes as Congress continues to struggle with what role government should play in determining top executive pay at companies that are so large and intertwined that their failure can ripple throughout the economy.
The House earlier this year voted to tie compensation to performance in hopes of reducing risky behavior. The limits would apply to any financial firm with more than $1 billion in assets. The Senate has yet to act on pay regulations.
Feinberg last week set pay for the top 25 executives at Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial — all seven received billions of dollars in government bailouts.
At the same time, the Federal Reserve proposed that it would monitor pay packages at nearly 6,000 banks, including those that have not received government aid, to make sure they don't encourage high-risk gambles. The Fed would not set pay, but could veto pay policies.
Feinberg told the House Committee on Oversight and Government Reform that he rejected compensation plans by six of the seven companies because they were contrary to the public interest. That the companies submitted such proposals, he acknowledged, indicated a lack of understanding over the public outrage over high pay at bailed out firms.
"I found that the submissions did not adequately address the major concerns expressed by the American people," he said. Feinberg said Chrysler Financial had unique circumstances that justified their pay plan.
Feinberg became pay czar earlier this year as Congress was responding to outrage about huge bonuses being paid to AIG. Lawmakers wanted to curb executive compensation at companies getting exceptional assistance. Feinberg has been reviewing compensation packages since August.
Feinberg said that in some instances his compensation scheme increased the monthly salary received by executives at the seven companies. But he disputed a Wall Street Journal report Wednesday, saying he dramatically cut the overall cash payments to those executives.
"My definition of base salary is not only what you get twice a month, but also draws that may be provided during the course of the year, guaranteed commissions, guaranteed bonuses," he said.
Feinberg must now deal with the compensation structures for the next 75 most highly paid executives at the seven companies and then determine 2010 compensation for senior executives.
He said he expects to have to renegotiate some past retention contracts with several of those company officials.
Republicans cautioned that while it was proper to rein in compensation of executives at recipients of government money, the practice set a dangerous precedent.
"One person, one single person is deciding what people make," said Rep. Jim Jordan, a Republican. "That is a dangerous, dangerous place we're going."
Democrats said they wondered whether Feinberg's work would have a broader effect.
"When they talk about multimillion dollar bonuses, it's like shoeshine money to them," Rep. Elijah Cummings, a Democrat, told Feinberg. "I can't see, with all your fine work, that it is going to be turned around."