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US 'plans bailout firm bonus cut' US 'plans bailout firm bonus cut'
(about 2 hours later)
Firms in the US that benefited from government bailout cash will be told to drastically cut bonuses for their highest paid executives, a report says. Firms in the US which received billions of dollars of government aid in the financial crisis are to be told to cut the pay of top executives, reports say.
The seven companies who received most aid from the US Treasury will have to slash pay of their 25 best-paid workers by up to 90%, Associated Press said. The seven companies that received the most aid from the US Treasury will have to reduce the basic salaries of their 25 best-paid employees by up to 90%.
The totals paid to each firm's 125 top earners would be halved under the plan.The totals paid to each firm's 125 top earners would be halved under the plan.
As in the UK, there has been widespread anger at bonuses paid by firms that needed government help to stay afloat. There has been widespread outrage over the high level of bonuses paid by firms that had to appeal for government help.
AP named the seven companies as Bank of America, AIG, Citigroup, General Motors, GMAC, Chrysler and Chrysler Financial. The seven companies affected would be Bank of America, American International Group (AIG), Citigroup, General Motors, GMAC, Chrysler and Chrysler Financial.
'Offensive''Offensive'
The US is expected to announce the salary cuts for top executives within the next few days.
Kenneth Feinberg, the Treasury official appointed to handle compensation issues as part of the $700bn Troubled Asset Relief Programme (Tarp), will be in charge of the negotiations on salaries with each of the companies.
Officials close to Mr Feinberg say the plan, targeting the 25 top earners at each of the seven companies affected, will on average cut total compensation by about 50%.
MARDELL'S AMERICA With a growing sense of anger at the distance between Wall Street and Main Street, and a sense of unfairness that the bosses who'd helped fuel the crisis were getting rewarded for it, the administration obviously felt it had to act Mark MardellBBC North America editor Read Mark's thoughts in fullMARDELL'S AMERICA With a growing sense of anger at the distance between Wall Street and Main Street, and a sense of unfairness that the bosses who'd helped fuel the crisis were getting rewarded for it, the administration obviously felt it had to act Mark MardellBBC North America editor Read Mark's thoughts in full
The BBC's Mark Mardell said that under the plans, bank executives would also need special permission to claim perks worth more than $25,000 (£15,000) per year - including country club memberships and company cars. The plan will also change the form of the pay to align the personal interests of the executives with the longer-term financial health of their companies.
But, our correspondent says, they may not lose all the money. The base salary of the executives will be cut on average by 90%, while the remainder will be replaced by stock that cannot be sold for years.
The plan would be to pay some of it in stocks that executives would not be able to touch for a couple of years. Executives will also need permission to claim perks worth more than $25,000 per year - including country club memberships and company cars. Until now, companies were only required to provide guidelines for the use of such luxuries.
President Barack Obama has been outspoken about the payment of bonuses - when the rest of the country is still suffering from the fall out of the financial crisis. But it is still unclear exactly how much the executives will be allowed to earn, or how a figure will be determined by Mr Feinberg.
Smaller companies and those who have repaid the bail-out money, such as Goldman Sachs, JPMorgan Case, will not be affected.
President Barack Obama has been outspoken about the payment of bonuses - when the rest of the country is still suffering from the fall out of the global financial crisis.
Earlier this year, the president said he was "outraged" by plans by bailed-out insurer AIG to pay $165m bonuses pledged to executives.Earlier this year, the president said he was "outraged" by plans by bailed-out insurer AIG to pay $165m bonuses pledged to executives.
And this week his senior aide, David Axlerod, called the payouts "offensive", telling the ABC that firms "ought to think through what they are doing and they ought to understand that a year ago lot of these institutions were teetering on the brink and the United States government and taxpayers came to their defence".And this week his senior aide, David Axlerod, called the payouts "offensive", telling the ABC that firms "ought to think through what they are doing and they ought to understand that a year ago lot of these institutions were teetering on the brink and the United States government and taxpayers came to their defence".