BARTIROMO: EXECUTIVE COMPENSATION TOPPING THE AGENDA IN WASHINGTON TODAY AFTER THE HOUSE FINANCIAL SERVICES COMMITTEE HEARD TESTIMONY ON THE ROLE OF PAY IN THE FINANCIAL CRISIS IT'S THE TOP CONCERN FOR KEN FEINBERG THE OBAMA ADMINISTRATIONS NEW COMPENSATION CZAR IN A CNBC EXCLUSIVE INTERVIEW MARY THOMPSON JOINS ME NOW FROM CAPITAL HILL WITH MR FEINBERG ON HIS SECOND DAY ON THE JOB MARY TAKE IT AWAY
THOMPSON: HIS FORMAL TITLE IS SPECIAL MASTER OF EXECUTIVE COMPENSATION BUT I THINK A LOT OF PEOPLE LOOK AT YOU AND DUB YOU THE PAY CZAR ARE YOU THE MAN WHO IS GOING TO BE DETERMINING PAY ON WALL STREET THESE DAYS
FEINBERG: I'M THE INDIVIDUAL THAT WILL HELP DETERMINE WHAT A 175 CORPORATE OFFICIALS SHOULD RECEIVE THIS PHRASE PAY CZAR IS VERY VERY UNFORTUNATE
THOMPSON: WHY?
FEINBERG: IT IS AS IF I AM GOING TO ISSUE SOME IMPERIAL EDICT THAT'S GOING TO COMPEL CHANGES IN COMPENSATION MY ROLE REALLY IS TO WORK WITH THESE COMPANIES THESE 7 COMPANIES AND TRY AND REACH SOME CONSENSUS ON WHAT THE PAY OUGHT TO BE AND WHAT THE TERMS AND CONDITIONS OF THAT PAY SHOULD BE
THOMPSON: SO CLARIFICATION IT IS THE 7 COMPANIES THAT HAVE RECEIVED TARP MONEY THAT YOU ARE WORKING WITH
FEINBERG: THAT'S RIGHT
THOMPSON: WHAT IS IT THAT YOU ARE TRYING TO DETERMINE WITH THEM OBVIOUSLY WHEN I THINK ABOUT THE BANKS THEY SAY THEY NEED A CERTAIN LEVEL OF PAY IN ORDER TO ATTRACT KEY TALENT SO WHAT DO YOU DO WITH YOUR ROLE AS A GO-BETWEEN BETWEEN THE GOVERNMENT AND THESE COMPANIES
FEINBERG: WELL THERE ARE VARIABLES LISTED IN THE STATUTE IN THE REGULATIONS THAT I MUST APPLY IN AN EFFORT TO DETERMINE WHAT THE COMPENSATION SHOULD BE A COMPETITIVENESS IS JUST ONE VARIABLE PROFITABILITY AVOIDANCE OF EXCESSIVE RISK THESE ARE THE VARIABLES THAT I SHOULD APPLY AS PART OF THE LAW
THOMPSON: HOW DO YOU DETERMINE WHAT IS AVOIDANCE OF EXCESSIVE RISK THAT HAS TO BE ONE OF THE MOST DIFFICULT THINGS THAT YOU WILL DETERMINE
FEINBERG: WE HAVE TO SIT WITH THE EXPERT BOTH IN THESE COMPANIES BUT ALSO IN TREASURY OUR OTHER EXPERTS THAT WE HAVE RETAINED AND COME TO SOME COMMON DEFINITION OF WHAT IS APPROPRIATE IN A FREE CAPITALIST SOCIETY AND WHAT IS NOT
BARTIROMO: MR FEINBERG LET ME ASK YOU ABOUT THE CURRENT SET UP IF SHAREHOLDERS ARE GOING TO HAVE A SAY ON PAY AND YOU ARE GOING TO BE DISCUSSING PAY WITH THE BOARD AS WELL AS THE MANAGEMENT TEAM WHAT IS THE ROLE OF THE COMPENSATION COMMITTEE ON THE BOARD OF DIRECTORS
FEINBERG: COMPENSATION COMMITTEE WHICH IS NOT PART OF MY BEAT BUT THE COMPENSATION COMMITTEE WILL BE ADVISING THE COMPANY AS TO WHAT ELEMENTS OF COMPENSATION SHOULD BE CONSIDERED I WILL BE DEALING WITH THOSE COMPANIES AS WELL AS OUTSIDE EXPERTS AND TREASURY OFFICIALS
BARTIROMO: AND AS FAR AS COMPANIES THAT HAVE NOT RECEIVED TARP MONEY I RECOGNIZE THAT THIS IS REALLY A FOCUS ON COMPANIES THAT HAVE RECEIVED FEDERAL AIDE BUT ARE YOU PLANNING TO MAKING RECOMMENDATIONS FOR OTHER COMPANIES HOW DO YOU SEE THE REST OF THE COMPANIES OUT THERE PUBLIC COMPANIES DEALING WITH COMPENSATION ISSUES
FEINBERG: THOSE COMPANIES THAT ARE NOT RECEIVING MAJOR TARP ASSISTANCE ARE NOT PART OF MY JURISDICTION ONE HOPES THAT SOME OF THE RECOMMENDATIONS THAT WE COME UP WITH MIGHT VERY WELL PROVE TO BE MODELS OR A BLUEPRINT FOR OTHER COMPANIES TO VOLUNTARILY ADOPT BUT THAT'S NOT PART OF MY MANDATE
BARTIROMO: SIR DO YOU WORRY THAT THAT MANDATE WILL IN FACT STIFLE RISK TAKING STIFLE INNOVATION AND CAUSE TALENT TO GO TO INTERNATIONAL FIRMS TO FIRMS THAT ARE NOT UNDER THE GOVERNMENT MICROSCOPE
FEINBERG: YOU WORRY ABOUT ALL OF THESE THINGS THIS IS A DIFFICULT ASSIGNMENT I THINK THAT THE GOAL HERE WILL BE TO WORK OUT A BLUEPRINT THAT TAKES INTO ACCOUNT FACTORS LIKE RISK AND YET CAN BE ADOPTED AND RATIFIED BY COMPANIES IN A WAY THAT WILL BE A WIN WIN FOR THE COMPANIES FOR THE ECONOMY FOR THE UNITED STATES
THOMPSON: MR FEINBERG WHAT DO YOU CONSIDER FAIR PAY
FEINBERG: I DON'T ONE SIZE DOES NOT FIT ALL A FAIR PAY FOR GENERAL MOTORS OR CHRYSLER MIGHT BE DIFFERENT THAN FAIR PAY FOR CITIBANK OR BANK OF AMERICA I DON'T COME WITH AN PREDISPOSITION OF WHAT CONSTITUTES FAIR PAY THAT'S ALL GOING TO HAVE TO PLAY OUT OVER THE NEXT FEW MONTHS
THOMPSON: DOES FAIR PAY EXCLUDE ANYTHING ANY ELEMENTS
FEINBERG: AGAIN I AM NOT PREPARED TODAY THE SECOND DAY ON THE JOB TO PROVIDE YOU A MENU OR A RECIPE OF WHAT CONSTITUTES FAIR PAY OR NOT THOSE ELEMENTS WILL BE FLESHED OUT OVER THE NEXT FEW MONTHS
THOMPSON: ARE YOU GOING TO BE SERVING AS ANY KIND OF ADVISOR TO CONGRESS AS THEY TRY TO PUSH THROUGH ANY ADDITIONAL RULES OR REGULATIONS CONCERNING PAY ON OUTSIDE COMPANIES WE KNOW THAT SAY ON PAY IS GOING TO BE PUT FORTH AND THEN ALSO ALL DIRECTORS ON THE COMPENSATION COMMITTEE SHOULD BE INDEPENDENT WILL YOU CONSULT WITH THEM WILL YOU TELL THEM WHAT TO DO NEXT?
FEINBERG: YOU DON'T TELL CONGRESS WHAT TO DO NEXT I AM GLAD TO IF CONGRESS ASKS ME MY OPINION THAT'S FINE I WORK FOR THE SECRETARY FOR THE DEPARTMENT OF THE TREASURY FOR THE OBAMA ADMINISTRATION THOSE ARE THE ENTITIES I AM ANSWERING TO AND THOSE ARE MY FIRST OBLIGATION IS TO THE TREASURY DEPARTMENT AND THE LAW
BARTIROMO: AND MR FEINBERG I AM JUST GETTING AN EMAIL FOR A COLLEAGUE HERE WHO HALF SERIOUS HALF KIDDING WANTS TO KNOW WITH ALL DUE RESPECT HOW MUCH ARE YOU GETTING PAID AND HOW DO WE MEASURE YOUR PERFORMANCE
FEINBERG: YOU TELL YOUR COLLEAGUE I AM DOING THIS PRO-BONO I AM NOT GETTING ANY PAY I AM DOING THIS AT THE REQUEST OF THE SECRETARY FOR ZERO COMPENSATION AND IF YOUR COLLEAGUE WANTS ME TO EXPLAIN THAT TO THEM I WILL BE GLAD TO EXPLAIN THAT TO HIM
BARTIROMO: LET ME ASK YOU THIS AS FAR AS PERFORMANCE MEASURES HERE WHAT WILL BE THE MOST IMPORTANT PERFORMANCE MEASURE THAT YOU WILL LOOK AT IN TERMS OF DICTATING OR MAKING RECOMMENDATIONS FOR THE PAY OF THESE TOP INDIVIDUALS
FEINBERG: WELL THE REGULATION THAT GOVERN THE STATUTE THAT HAVE BEEN ANNOUNCED YESTERDAY LAY OUT SOME OF THOSE PERFORMANCE VARIABLES PROFITABILITY MERIT PAY AVOIDANCE OF EXCESSIVE RISK GENERAL MARKET CONDITIONS THERE ARE A SERIES OF VARIABLE I'LL ADD TO THOSE VARIABLES AGAIN THE BASIC PROPOSITION HERE WILL BE TO DEVELOP NOT BY EDICT BUT BY CONSENSUS WITH THE COMPANIES A FAIR BLUEPRINT OF COMPENSATION GOING FORWARD
THOMPSON: MR FEINBERG YOU ARE A MEDIATOR THAT'S HOW YOU MADE YOUR NAME I KNOW YOU ARE ONLY TWO DAYS ON THE JOB BUT WHAT DO YOU CONSIDER THE MOST IMPORTANT FLASHPOINT THAT YOU HAVE TO BRING THE TWO SIDES TOGETHER ON
FEINBERG: THERE ARE TWO CONFLICTING TENSIONS HERE ON THE HAND THERE IS POPULIST RAGE THE NOTION THAT THESE COMPANIES WERE SAVED BY TAX PAYER DOLLARS THEY SHOULD THE EXECUTIVES SHOULD NOT BE COMPENSATED THEY'RE LUCKY THE COMPANIES ARE EVEN IN EXISTENCE VERSUS THE NOTION HISTORICAL THAT THE US GOVERNMENT SHOULD STAY OUT OF INSINUATING ITSELF INTO THE PRIVATE MARKETPLACE AND MICROMANAGE THESE COMPANIES THAT TENSION BETWEEN POPULIST UNHAPPINESS AND THE NEED FOR THE GOVERNMENT TO PLAY AN APPROPRIATE ROLE AND NO MORE IS GOING TO BE THE REAL CHALLENGE HERE
THOMPSON: MR FEINBERG THANK YOU VERY MUCH FOR JOINING US TODAY
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