Coverage: Treasury overpays GM, Ally Financial execs

Just when you think TARP is over, the U.S. Treasury is coming under attack for executive pay at General Motors and Ally Financial. It’s hard to even remember that the government owns stakes in these companies.

Danielle Ivory had these details in The New York Times:

Top executives at General Motors and Ally Financial, both of which received bailouts from the United States Treasury Department in 2009, were paid excessively even as taxpayers lost money, according to a special inspector general report.

The report, released Wednesday, criticized the Treasury Department for loosening its own restrictions on executive pay for G.M. and Ally year after year. These limits had been imposed on the companies in exchange for money that they received at the height of the financial crisis from the Troubled Asset Relief Program, or TARP, that was started by President George W. Bush and continued by President Obama. The special inspector general acts as a watchdog over that program.

The Wall Street Journal story by Alan Zibel pointed out some of the issues over executive pay:

In a report, the special inspector general for TARP questioned Treasury’s pay oversight at the two firms, which remained in the 2008 federal rescue program far longer than other big companies.

“Treasury loosened its own pay restrictions for senior executives at General Motors and Ally Financial year after year, even as taxpayer losses in these companies mounted,” said Christy Romero, the inspector general.

The report highlights the continuing controversy over executive pay at bailed-out companies. The Treasury in 2009 gained power to approve executive pay at seven firms that received significant federal assistance during the financial crisis, following public outrage over big bonuses paid at American International Group Inc. after its financial rescue.

Treasury officials say they have sought to balance their mandate to limit compensation with the need to keep executive pay competitive with other companies, and say the U.S. has recovered $25 billion more than initially invested in the seven firms subject to pay oversight.

Iris Dorbian wrote for CFO magazine that Treasury rejected the claims that the pay was excessive:

The accusation was made by Christy Romero, special inspector general for the U.S. Troubled Asset Relief Program. In a special report she prepared for Treasury, Romero wrote that “Treasury significantly loosened executive pay limits resulting in excessive pay for (the) top 25 executives” at GM and Ally while “taxpayers were suffering billions of dollars of losses” on loan repayments and share sales.

The Treasury denied the charge, saying the report was riddled with inaccuracies and omissions, says Reuters. Further, the department maintained that the compensation of top executives at GM and Ally was restricted while those firms were receiving TARP funding.

Dan Akerson, GM’s CEO from 2010 (he retired in January), was paid $9 million in cash and stock in 2013, a filing reports. His successor Mary Barra was paid $5.3 million in cash and stock in 2013 when she served as executive vice president, says Reuters.

According to terms of its 2009 bailout of GM, the Treasury acquired a “substantial” stake in the company before selling it off completely in December 2013. Following the exit, GM said it put in place “a more appropriate performance-based compensation structure.”

The Reuters story by Paul Lienert and Bernie Woodall had these responses from the companies:

In a statement, GM said: “We remain grateful for the assistance we received from taxpayers. While the U.S. Treasury owned GM stock and ever since, we have worked to align executive compensation with the long-term interests of stockholders and we will continue to do so.”

Ally said in a separate statement that it was “pleased to have been able to more than repay the American taxpayer” despite “significant restraints” imposed by TARP. Ally also said its executive compensation plan “meets the requirements for TARP companies.”

The U.S. Treasury still holds a 13.8-percent stake in Ally.

GM Chief Executive Dan Akerson, who helped revamp the automaker after its 2009 government-sponsored bankruptcy and taxpayer-funded restructuring, was paid $9 million in cash and stock in 2013, according to regulatory filings. Akerson retired in January.

His successor, Mary Barra, was paid $5.3 million in cash and stock in 2013, when her title was executive vice president.

GM noted earlier this year that it put in place “a more appropriate performance-based compensation structure” after Treasury sold its GM shares.

It’s interesting that executive pay is resurfacing as an issue nearly seven years after the financial crisis. But what’s even more astonishing is that there are companies who haven’t repaid TARP. While overall the government program worked and helped stabilize the system, it’s time for it to be over. The surest way to set pay without comment is to only have to report to your investors.