U.S. Orders AIG Top Salaries Cut By 91%

He said companies receiving exceptional government payments will have to undergo the same compensation examination procedure each year until they pay back all the money due the government.

He said that additional compensation should be paid in stock not completely payable until the fourth year, or 2012.

This, he said, would link the management salaries with the company's performance.

Mr. Feinberg was acting under a law passed by Congress in February requiring Treasury to oversee pay at companies that took bailout money.

Treasury created the pay czar's office in June as one means of implementing that law, and appointed Mr. Feinberg to the post.

Under rules established by the Treasury Department, the special master is required to review pay for the 25 top earners at companies that received "exceptional assistance," examining overall pay structures and recapturing payouts that go against taxpayers' interests.

Moreover, the pay restrictions for all seven companies subject to Mr. Feinberg's actions require that any executive seeking more than $25,000 in special benefits — things such as country club memberships, private planes and company cars — to get permission for those perks from the government.

Besides AIG, they are Citigroup, Bank of America, General Motors, Chrysler, General Motors Acceptance Corp. (GMAC) and Chrysler Financial.

But, in slashing AIG salaries, he did not disturb the contract of incoming chief executive officer Robert Benmosche, nor the rest of his total compensation package of $10 million over 10 years.

He also did not alter the prior compensation packages of three top executives which AIG officials argued were being paid under a previously existing agreement between the company and the employees.

But, in a pointed comment, he said, "such good cause will not exist" in the case of the three top executives being paid under the prior agreement.

None of the top 25 officials for whom Mr. Feinberg set pay were identified.

At the same time, he eliminated bonuses through the rest of the year for employees at AIG's troubled Financial Products unit, the unit whose activities brought the company to the brink of failure and the need for a government bailout.

And, he said that "employees in this unit who pledged to return amounts paid pursuant to previously existing retention awards must immediately repay the pledged amount."

Specifically, as he stated in a "definitive memorandum," four of the five employees who had pledged to return their bonuses had not done so.

He also noted that all the other employees at AIGFP "did not pledge to return any of the amounts received in early 2009."

Mr. Feinberg also noted the payments under non-qualified deferred compensation plans that combined with retention payments to AIGFP executives earlier this year that stirred congressional ire.

Specifically, in March AIG disclosed that it was paying $165 million in retention bonuses to executives at the financial products unit that generated the $2.77 trillion notional amount of credit default swaps that brought the company to near insolvency in September 2005.

At one point, AIG was the recipient of $180 billion in federal aid; that amount is currently down to $83 billion, the company said.

Specifically, he said, "No additional amounts in 2009 may be accrued under supplemental executive retirement plans after today's date.

Mr. Feinberg said he followed the law and policy in setting compensation packages for seven companies that received "exceptional" TARP assistance.

At the same time, he said, "I am extremely sensitive to the public outrage" over high salaries paid at firm that needed federal assistance to stay in business.