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Overseer of Big Pay Is Seasoned Arbitrator

If there is one thing Kenneth R. Feinberg does not like to be called, it is a czar.

But the man the Obama administration appointed Wednesday as the compensation official for companies on federal assistance will have an almost unprecedented discretion to set pay for some of the nation’s top bankers and chief executives.

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CNBC.com

He will advise banks still supported by taxpayer bailouts on the kinds of pay systems they should use. He could even decide whether banks repaying the government were too generous with salaries while they were receiving backing.

The mandate is among the most sweeping given to an individual to oversee the compensation of an entire industry and reflects the federal government’s increasingly visible hand in corporate affairs.

Yet to Mr. Feinberg, who became a nationally known figure after the Bush administration assigned him to help settle possible lawsuits by the families of victims of the terrorist attacks on Sept. 11, the job is about restoring a sane pay structure that discourages the sorts of high-flying risks that stoked the worst financial crisis since the Depression.

“One thing that troubles me is this notion of me described as a compensation czar,” Mr. Feinberg said in an interview. “It makes it sound as if my goal is to impose certain restrictions on the private marketplace, whereas I am much more interested in working with these companies.”

Mr. Feinberg has extensive experience in mediating complicated compensation disputes.

As the arbiter of payouts for families of the victims of the Sept. 11 attacks, his job was to put a value on the lives of the victims and offer government settlements to avoid lawsuits. He met with many of the families and spoke around the country about how intellectually challenging and emotionally difficult the assignment became. He often sought refuge by cloistering himself in a room in his home to listen to his extensive opera collection.

Mr. Feinberg’s powers were sweeping in that situation: he helped create the fund’s rules and procedures, oversaw its operations, and was charged with personally signing off on awards made to claimants, who were required to waive their right to sue over the attacks and forgo appeals of the fund’s decisions.

Then, as now, Mr. Feinberg, received no compensation for his work. Although originally derided as arrogant, he worked ceaselessly on the program, eventually winning converts after the first awards to families were made in August 2002.

His penchant for instilling discipline to the process paid off. When concern began to grow that few families would file applications with the fund, Mr. Feinberg declined to extend filing dates because it would “fuel procrastination.” His decision to set a firm deadline helped avoid new delays and brought the payout process to a rapid close.

Because the Sept. 11 fund was set up as an alternative to the court system, Mr. Feinberg was required to pay out more money to families of high-earning victims, like stock traders, than he did to relatives of low-paid workers. Recalling those decisions, he said: “I think it would have been a lot easier and more effective if everyone got the same amount of money.”

Representative Barney Frank, Democrat of Massachusetts, said that Mr. Feinberg’s appointment showed the administration’s commitment to reform. “He showed a great deal of skill with the much more emotional subject after 9/11,” Mr. Frank said.

Before that assignment, he was appointed by federal district judges to help resolve several difficult product liability lawsuits. He played central roles in resolving cases involving victims of asbestos, Agent Orange and the Dalkon shield, a birth control device that injured more than 200,000 women.

Mr. Feinberg, who was formerly chief of staff for Senator Edward M. Kennedy and was considered for the post of White House counsel in the Clinton administration, was also one of three arbitrators who determined the fair market value of the Zapruder film that captured the assassination of President John F. Kennedy. He resolved a dispute between the heirs of Abraham Zapruder, who shot the footage, and the government, which acquired the 26-second film.

“In what may be one of his more controversial roles as the administration’s compensation official, Mr. Feinberg has the authority to ask any company that received money from the asset relief program to reimburse the government for salaries deemed excessive while they were on taxpayer support.

He did not clarify whether he would pursue companies that had returned taxpayer money — including JPMorgan Chase and Goldman Sachs, which paid off the government this week — saying only that he would actively review compensation handed out for 2008 at companies still on taxpayer support.

Laura Thatcher, the head of the executive compensation practice at Alston & Bird, said that his role raised serious questions about government interference in compensation in the private sector.

“It’s a very unusual thing to turn over the setting of pay to a third party,” she said, adding that state law gives only boards direct authority over compensation.

Still, Ms. Thatcher said she thought it would be unlikely that companies would challenge the government.

“I think the real challenge here,” Mr. Feinberg said, “is going to be balancing the populist sentiment which says the taxpayers should not be subsidizing compensation for these TARP recipient companies versus the historical view in this country that government had best stay out of managing compensation at private companies.”

Mr. Feinberg said he would differentiate among compensation plans at industrial companies like General Motors and financial companies like Citigroup, and said he would not look for a “one-size-fits-all approach.”