White House gets tough on top executives' pay

The US administration is set to order bailed-out firms to slash their payouts to top executives.

Reports have suggested that the Treasury will tell seven firms that took billions of dollars of taxpayers' cash that they must cut base salaries to their top 25 bosses by around 90%, with overall packages, including bonuses, down by half.

The formal announcement of the plan is due to be announced within days. Speaking today, the head of the panel that oversees the $700bn (€467bn) bailout to companies said the reports of a massive clampdown on executive pay were “real”.

Elizabeth Warren, head of the Targeted Asset Relief Programme’s oversight committee, told CBS’s 'The Early Show': “It’s real in the sense that it says, ’Guys you have to understand that you can’t party on like it’s 2007’.

“If you are going to take taxpayers dollars, then the game has to change.”

The seven companies earmarked for a dressing down from Washington are Bank of America, AIG, Citigroup, General Motors, GMAC, Chrysler and Chrysler Financial.

All took a slice of taxpayers money as they struggled though the financial crisis.

Smaller companies and those that have repaid the government are to be exempt from the Treasury’s demands, reports have suggested.

In addition to seeing overall salaries slashed, top bosses will also have to get permission from the government if they receive more than $25,000 (€16,700) in special benefits including country club memberships, private planes and company cars.

The expected move follows widespread outrage in the US over the high level of bonus packages received at companies that went cap in hand to the government as the economy faltered.

The White House is known to have become increasingly irritated with Wall Street paying huge pay packages at a time when the rest of the country is still suffering from the fall out of the financial crisis.

On Sunday, President Barack Obama’s senior aide David Axlerod called the payouts “offensive”.

He told ABC’s 'This Week' programme: “They ought to think through what they are doing and they ought to understand that a year ago a lot of these institutions were teetering on the brink and the United States government and taxpayers came to their defence.”

The decision to cut executive pay follows the passing of legislation in February giving the US Treasury the power to oversee pay at bailed-out companies.

A pay tsar, created as part of the bill, has until October 30 to announce plans for salaries at the firms.