US appoints executive paymaster

The pay czar could restrict the pay of executives like Citigroup boss Vikram Pandit

The US has appointed a "pay czar" to review executive compensation packages for firms that have received government bail-outs.

Kenneth Feinberg, a Washington lawyer, will have the power to set the pay and bonuses of executives at some of the biggest US companies.

These firms include Bank of America, Citigroup and General Motors.

The appointment is part of a wider set of recommendations on pay that could affect all publicly traded companies.

Bonuses awarded to executives at collapsed insurer AIG caused an uproar earlier this year.

Bigger voice

Treasury Secretary Timothy Geithner said the administration would also urge new laws to give shareholders greater say on executive pay and to require corporate compensation committees to be independent from company management.

The financial crisis had many significant causes, but executive compensation practices were a contributing factor Timothy Geithner, US treasury secretary

According to the New York Times, Mr Feinberg is a well-known mediator who came to prominence when tasked with assigning a financial value to lives of victims of the 9/11 attacks to help avoid lawsuits.

The newspaper said he would set the pay for top 25 executives at AIG, Citibank, Chrysler, Chrysler Credit, General Motors, car finance firm GMAC and Bank of America,

For the 80 or so other financial institutions that have received government assistance, Mr Feinberg will develop a compensation structure without setting the exact level of pay.

"The financial crisis had many significant causes, but executive compensation practices were a contributing factor," said Mr Geithner.

"Incentives for short-term gains overwhelmed the checks and balances meant to mitigate against the risk of excess leverage (debt)," he added.

Pay back

The move to closer regulate executive pay comes after the US allowed 10 of its largest banks to repay $68bn (£42bn) in government bail-out money.

These banks, which included JP Morgan, Morgan Stanley and Goldman Sachs, will not be subject to the government's pay czar.

They had passed US government's stress tests in May that assessed whether banks had the money to withstand further shocks to the economy.