US authorities cap compensations of managers in bailed out companies

American authorities last week imposed restrictions on compensation packages in the banking sector and in other major companies bailed out by taxpayers, which is unprecedented in the United States. The strongest offensive came from the Federal Reserve, which asked banks to revise their bonus policies to prevent it from affecting their safety and financial stability.

The decision of the Fed is just the beginning of a process which is considered necessary for the stabilization of the financial system, according to the commitments made last month by G20 countries.

Stressing that "bonus practices in the financial sector were one of the numerous factors that led to the crisis", the Federal Reserve asked banks to revise their compensation rules, or run the risk of penalties. The Federal Reserve also promised tighter controls.

The United States administration also decided that, starting next month, it will drastically cut wages of the managers of the seven companies that received the largest state aid after 2008 or that were nationalized.

The final recommendations announced by Kenneth Feinberg, who was appointed by president Barack Obama to rein in compensation in these companies, provide the cutting of 25 executives in these companies by 50% on average, starting in November.

These wage recommendations could affect 175 people in the first stage, by imposing a 90% cut of their cash compensations, while also introducing changes in stock options. In order to ensure viable long term management, executives will be required to be allowed to sell their stock for several years.

The regulatory body led by Feinberg controls compensations of "Chrysler", "General Motors", GMAC, "Chrysler Financial", "Citigroup", "Bank of America" and AIG.