Kenneth Feinberg, special master of compensation, U.S. Treasury Department, was the keynote dinner speaker at The Directorship Boardroom Leaders Forum November 16, 2009, at the Metropolitan Club in New York City. Here is a transcript of his speech: “Executive Compensation: Opportunities and Pitfalls.”
I want everybody to understand just how limited my role is, and why The New York Times, in acknowledging and congratulating me on what I’ve done so far, said that what I’m doing is largely a sideshow. And in a certain respect, it is.
Remember, under the law that I am implementing, I have mandatory jurisdiction over the pay of just seven companies. That’s all. The seven companies that owe the taxpayer the most amount of money. And even as to those seven companies, I only determine the compensation for the Top 25 individuals in each of those seven companies–175 people.
My mandatory jurisdiction also requires me under the law to establish the compensation structure for officials [No.] 26 to 100 in each of those seven companies. I’m not making this up. This is the way the law was written.
I set compensation for [No.] 1 to 25 in the seven companies, and [No.] 26 to 100, I establish and design the structure for that compensation. Now, that is it, for my mandatory jurisdiction.
So why is there such interest in what I’m doing? And I think the reason is, that although the Federal Reserve and the SEC, the FDIC and others, have all to varying degrees prescribed principles to govern executive compensation, I’m apparently the only person who actually has to take those prescriptions and calculate the dollars, the actual compensation for these individuals, and the structure for those seven companies.
So, I think one of the major reasons there’s interest is, well, how do you take those prescriptions that largely, I think, most people would say are fine, and translate them into actual dollar compensation for this person and that person? And that’s the challenge.
Now, how did I go about doing that so far? Well, you know how I do it. You know better than anybody how I do it. First, I get all this data–all this data from the companies, comparative data. Data going back two, three, four years. Here is what the competition pays, here is the compensation, here is the job classification, here is what we’re asking for. There it is, with a ribbon. Thank you very much–fills up the room.
Then I go out and get my own data from independent sources. Hard to find independent sources. Very difficult to find truly independent sources. Somebody said earlier, what do you mean by independence? Try getting that independent data. Not easy. Of course, I rely on these world-renowned experts at the Harvard Business School and at the University of Southern California, and they roll in with a certain academic bent, which is appreciated. And we get that input.