This new Motley Fool series examines things that just aren't right in the world of finance and investing. Here's what's got us riled today. If something's bugging you, too -- and we suspect it is -- go ahead and unload in the comments section below.
Today's subject: President Obama's "pay czar," Kenneth Feinberg, has formally approved the compensation package for Robert Benmosche, the new CEO of AIG (NYSE: AIG ) . Since taking the post in early August, Benmosche has caused nothing but controversy. Yet for some reason, Feinberg approved a total salary package of $10.5 million -- $3 million in cash, $4 million in stock, and $3.5 million in annual performance bonuses.
Don't get me wrong; Benmosche is more than qualified. He's largely credited with shaping the insurer giant MetLife (NYSE: MET ) and bringing a brash but efficient attitude to business. Since his appointment as AIG's new chief, the stock has soared by more than 200%. Wall Street obviously likes him. Shockingly, so does Kenneth Feinberg.
Why you should be indignant: Let me guide you through a very loose timeline of events since Benmosche took his new job:
- After being appointed CEO of the nation's largest TARP recipient, Benmosche took a two-week vacation to his 8,000-square-foot villa in Croatia. Interesting timing.
- He requested a corporate jet for personal leisure, and was rejected by AIG's board of directors.
- He has made several provocative statements, such as calling Congress "a bunch of crazies," and saying that New York state Attorney General Andrew Cuomo "doesn't deserve to be in government."
According to Feinberg, Benmosche's salary is commensurate with that of other CEOs. Feinberg also oversees the compensation packages for top executives of other bailed-out companies, including Chrysler, Citigroup (NYSE: C ) , Bank of America (NYSE: BAC ) , and General Motors.
I guess Feinberg is trying to find a middle ground in terms of salary. Certainly, a total package of $10.5 million isn't unheard-of, but considering the circumstances, I'm surpised Benmosche's making so much. In 2008, the CEO of troubled Freddie Mac (NYSE: FRE ) and untroubled Home Depot (NYSE: HD ) each made less than $5 million. Guaranteeing $3 million plus stock options and bonuses for someone who has shown a general distaste for public servants, and a lack of fiscal restraint, seems like a premature move on Feinberg's part.
According to CNN, Benmosche told reporters he didn't want to be tempted to sell off assets too quickly -- just a guess, but maybe that's why he went on the two-week vacation? This isn't necessarily a bad strategy -- however, if Benmosche holds onto the assets, and their value goes down, the taxpayer loses. If he holds on to them, and the value goes up, AIG's shareholders win. As one congressman from California put it, "It's heads he wins, tails we lose."
That's a pretty good strategy for a normally functioning public company, but not really that great for a company that has "borrowed" $120.7 billion from the American taxpayer. Bottom line: Benmosche's on my watch list.
As for Feinberg, I haven't the slightest idea what he's thinking. Endorsing such a high salary for someone who has (a) proven nothing at his current position, and (b) only shown contempt for Washington and the general public seems like an irrational decision. I mean, really. Villas? Name-calling? Corporate jets?
Both the administration and the public have been outraged by excessive executive compensation and Wall Street's lavish bonus structure. Feinberg has talked a big game about curbing take-home pay, especially for bailed-out firms. So why the heck is he reinforcing an outdated system that rewards past performance, and ignores the benefits of a meritocracy?
So far, he seems more like a pay peasant than a pay czar. But that's just my take.
What do you think, Fools? Am I being too quick to judge, or do you feel the same?