Under the guidelines for the Troubled Asset Relief Program, which invested billions of taxpayer dollars in bailing out the nation’s banks and carmakers, executive pay is supposed to kept to reasonable levels. In the case of General Motors, it pledged to cap salaries at $500,000; not bad for a company that allowed nearly two dozen people to die rather than fix an ignition switch. But the TARP watchdog says that once again the Treasury Dept. has allowed GM to pay execs more than it agreed to.
In her report [PDF] to Treasury Secretary Jacob Lew, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Christy Romero says the Treasury’s Office of the Special Master (OSM) for TARP “significantly loosened” executive pay limits at GM and its financial division Ally, resulting in salaries far in excess of $500,000.
“Year after year, Treasury has loosened executive pay limits, getting further and further away from the President’s announced pay reforms and pay limits used by Treasury in 2009, even as taxpayer losses mount,” writes Romero.
Executive salaries at TARP businesses were supposed to be capped at $500,000, with any additional compensation coming from shares of company stock that couldn’t be paid until taxpayers were paid back.
But the Treasury Dept. has not followed those guidelines, under pressure from GM to offer salaries that are competitive.
“Treasury’s mounting exceptions to its own guideline restrictions on executive compensation resulted… in OSM moving further and further away from the President’s announcement and OSM’s prior guidelines,” reads the SIGTARP report. “Instead of making meaningful reforms to its process, OSM rolled back its application of guidelines aimed at curbing excessive pay, whereby approving high pay driven by Ally and GM’s excessive pay proposals without independent analysis and under an ill-defined, pay-setting process that lacked objective criteria.”
As a result, all of GM’s top 25 execs earned Treasury-approved salaries of at least $1 million in 2013. Additionally, Treasury allowed the number of GM and Ally employees earning more than $500K to triple between 2009 and 2013.
In 2013 alone, OSM approved $3 million in pay raises, ranging from 4% to 20%, for just nine GM employees, most of whom had received raises the year before.
“The pendulum in OSM’s pay decisions has swung too far in the direction of keeping companies competitive, without regard for the fact that the reason to keep companies competitive is so that they can repay taxpayers in full,” writes Romero. “GM and Ally were not repaying taxpayers in full. Rather, taxpayers have suffered billions of dollars in losses on those TARP investments.”
In response, the Treasury takes issue with SIGTARP’s claims of losses, saying that overall, taxpayers have earned back a total of $440 billion on payouts of $425 billion. However, taxpayers did ultimately take a $10.5 billion loss when the government sold off its remaining shares of GM in late 2013.
Other defenders of the pay packages point to job growth from U.S. automakers (and the fact that GM and Chrysler still exist at all) as evidence that the program achieved its long-term goals of supporting American industry.
by Chris Morran via Consumerist
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