The U.S. Treasury approved “excessive” pay raises for executives at several bailed-out firms last year, according to a new report by the special inspector general overseeing the Troubled Asset Relief Program.
The report criticizes the Treasury for approving all 18 pay raise requests from AIG, General Motors and Ally Financial, 14 of which amounted to $100,000 or more. The biggest raise was for $1 million.
From the report:
[The Special Inspector General for TARP] found that once again, in 2012, Treasury failed to rein in excessive pay. In 2012, [the Office of the Special Master for TARP Executive Compensation] approved pay packages of $3 million or more for 54% of the 69 Top 25 employees at American International Group, Inc. (“AIG”), General Motors Corporation (“GM”), and Ally Financial Inc. (“Ally,” formerly General Motors Acceptance Corporation, Inc.) – 23% of these top executives (16 of 69) received Treasury-approved pay packages of $5 million or more, and 30% (21 of 69) received pay ranging from $3 million to $4.9 million. Treasury seemingly set a floor, awarding 2012 total pay of at least $1 million for all but one person. Even though OSM set guidelines aimed at curbing excessive pay, SIGTARP previously warned that Treasury lacked robust criteria, policies, and procedures to ensure those guidelines are met. Treasury made no meaningful reform to its processes.
“[We] expect Treasury to look out for taxpayers who funded the bailout of these companies by holding the line on excessive pay,” Christy Romero, the special inspector general for TARP, wrote. “Treasury cannot look out for taxpayers’ interests if it continues to rely to a great extent on the pay proposed by companies that have historically pushed back on pay limits.”
The report also notes that in 2012, “OSM did not follow its own guidelines aimed at curbing excessive pay by having total compensation generally not exceed the 50th percentile for similarly situated employees. Treasury awarded total pay packages exceeding the 50th percentile by more than $37 million for approximately 63% of the Top 25 employees of AIG, GM, and Ally.”
The Washington Post reports that Patricia Geoghegan, the Treasury official who approved the pay increases, wrote a letter to Romero objecting to the report’s findings:
Geoghegan said it’s unfair to call the pay excessive. She said Treasury must strike a balance between limiting compensation and approving pay packages that are consistent with executives in similar jobs.
Geoghegan called the 50th percentile “a benchmark.” She noted that some pay packages at the three companies exceeded that level in 2012. But she said more than half at AIG were at or below that level, while nearly half at GM and Ally were below it.