Some Answers, More Questions, on Exec Pay

by Noam Scheiber | October 23, 2009

Yesterday I wondered about the long-term stock grants that pay czar Ken Feinberg is asking TARP recipients to give executives in lieu of cash salaries, which will fall sharply. The news reports said employees generally wouldn't be able to touch their stock grants for four years, but it wasn't clear if the employees would also forfeit their stock if they left sooner. For what it's worth, today's Wall Street Journal provides a little more detail on that question:

The stock units, Mr. Feinberg ruled, would be payable in three equal annual installments, starting two years after they were granted -- in effect giving executives incentive to stay at the company and help it thrive.

It sounds like the executives would have to stick around to receive the stock, but it's still not entirely clear what happens if they don't. And it's obviously a key question, given that there's going to be a temptation for some people to leave in search of less restrictive compensation. It would be nice if leaving also meant leaving money on the table.

Update: One other thing I meant to clarify. Yesterday I worried that a $200,000 cap on total compensation for employees of AIG-FP was a little draconian and likely to be counterproductive. It turns out those reports were wrong. The Journal corrects the record in the same piece I mentioned above:

Earlier this week, The Wall Street Journal reported that no employee at the unit would get compensation of more than $200,000. The documents released Thursday indicate that pertains to annual cash salaries. Many employees at the unit also received cash bonuses in March and are due to get additional retention awards in 2010.

Source URL: http://www.newrepublic.com//blog/the-stash/some-answers-more-questions-exec-pay