Take a 90% pay cut, Obama tells bosses

Published on 22/10/2009 22:15

EXECUTIVES working for American companies, which were bailed out by US taxpayers, are to have their salaries cut by up to 90 per cent.

And US President Barack Obama's pledge to crack down on the fat-cat culture of big business will see drastic cuts in the pay taken home by leading US bankers and industrialists.

But the UK Treasury said yesterday there were no plans to introduce a similar scheme to Britain.

Officials insist tough measures had already been put in place to tackle the massive pay-outs that contributed to the banking crisis.

A Treasury spokesman said: "We did not change anyone's base salaries and we did not change our employment contracts and we have no current plans to do so.

"In future we will align remuneration with performance."

In the US, seven companies which received the bulk of government aid when billions of dollars were handed out by the US Treasury, are to be ordered to reduce the basic salaries of their 25 best-paid employees by up to 90 per cent. Much of the lost salary will be replaced by stock, which executives at the Bank of America, American International Group (AIG), Citigroup, General Motors, GMAC, Chrysler and Chrysler Financial will be unable to access for a number of years.

Under the US scheme, which is expected to be officially announced next week, the totals paid to each firm's 125 top earners would be halved. Yesterday Elizabeth Warren, the chairwoman of the US's $700 billion (421 bn) Federal Bail-Out Fund, said that the Obama administration was serious about slashing their pay.

Speaking on American television Ms Warren said reports of pending reductions in executive salaries were "real".

"Guys, you have to understand that you can't party on like its 2007. If you're going to take taxpayer dollars, then the game has to change."

In common with the UK, there was outrage on the other side of the Atlantic over the high level of bonuses paid by firms helped by the government.

Earlier this month Britain's five largest banks, which include the taxpayer-funded Royal Bank of Scotland and Lloyds Banking Group, signed up reforms that would see up to 60 per cent of bonuses deferred over three years.

RBS has already announced a pay freeze for directors and executives plus a "no reward for failure" policy, which means no bonuses will be made to staff associated with the massive losses suffered in 2008.

Similar action has been taken by Lloyds.

IF ONLY..?

IF THE US proposals were introduced to the UK, bankers would see their pay cut like this:

RBS chief executive Stephen Hester, 1.2m to 120,000

Lloyds Banking Group executive director Eric Daniels, 1.15m to 115,100

Northern Rock chief executive Gary Hoffman, 700,000 to 70,000

Bradford & Bingley MD Richard Banks, 250,000 to 25,000