The Obama administration's pay czar is limiting the cash compensation for executives at companies that received the largest taxpayer bailouts to $500,000.
The 25th through the 100th top earners at Citigroup, GMAC, American International Group and General Motors also must take more than half their compensation in stock, and at least half must be delayed for three or more years, said Kenneth Feinberg, the Treasury Department's Special Master for Executive Compensation.
About 12 executives were granted exemptions to the $500,000 cash cap because they were necessary for the companies to "thrive, be able to compete, and not lose key people," he said Friday.
The new rules will only apply to the second half of December, and will not affect what the employees already have been paid this year.
The rules will affect many workers' year-end bonuses and stock grants, Feinberg said. They also will serve as a starting point for negotiations next year over pay packages for 2010.
Feinberg already announced specific pay packages for the top 25 earners at firms he oversees. His rulings don't apply to Bank of America because its bailouts were repaid this week. Chrysler and Chrysler Financial also were exempt because executives there made less than $500,000.
Under the new rules, cash can make up only 45 percent of a person's pay. At least half of total compensation must be "long-term," and cannot be redeemed for at least three years. And all incentive pay must come from a pool whose size is based on earnings or another performance measure.
Fringe benefits like the use of private jets will be limited to a value of $25,000 per year.
Unlike the pay packages for the top 25 earners, Friday's rules mostly will be implemented by the companies. But Feinberg said he did review all the requests for cash salaries in excess of $500,000 per year.
He reviewed dozens of requests but only granted about 12. Of those, all but one will earn between $500,000 and $950,000. The remaining person will earn about $1.5 million. He did not identify the individuals or say what companies they work for.
Feinberg did say that some of the exemptions were granted for AIG, which received government support worth up to $182 billion. Large bonuses at the firm sparked outrage earlier this year.
"It was not only AIG" that wanted the employees to earn more than the $500,000 cap, Feinberg said. "It was the Federal Reserve, it was the Treasury Department."
Going forward, the independent directors on the companies' compensation committees will have to approve such exemptions. Feinberg will continue to oversee them.