The U.S. Treasury Department continued to approve “excessive” pay raises for top executives at General Motors and its former consumer finance arm, both of which received taxpayer-funded bailouts during the financial crisis, a new government report says.
The government watchdog that oversees the $475 billion bailout said Treasury approved cash salaries exceeding $500,000 last year for 16 of the 47 top executives at General Motors Corp. and Ally Financial Inc. Treasury allowed total pay packages, including company stock, of at least $1 million for every top executive at the two companies, according to the report released Wednesday by the special inspector general for the Troubled Asset Relief Program.
It said the government approved $3 million in pay raises, from 4 percent to 20 percent, for nine GM executives, most of whom had previously received raises several years in a row. The government sold its last shares of GM in December.
“Treasury loosened its own pay restrictions for senior executives at General Motors and Ally Financial year after year, even as taxpayer losses in these companies mounted,” Christy Romero, the special inspector general, said in a statement. “Treasury could be sending the message that much-needed reforms coming out of the financial crisis are no longer necessary or required in exchange for TARP dollars.”
A report issued in April by Romero estimated that taxpayers lost $11.2 billion on the GM bailout, up from a previous estimate of $10.5 billion. The automaker needed the $49.5 billion in aid to survive its 2009 bankruptcy restructuring. GM went public again in November 2010.
GM has faced intense scrutiny this year over its failure to correct an ignition-switch defect in small cars for more than a decade, even as it learned of fatal crashes. The company recalled 2.6 million cars this year to replace the switches. It has been under investigation by Congress and the Justice Department.
Detroit-based Ally, formerly called GMAC Inc., was the auto loan and mortgage arm of GM until it was taken over by the government in the 2008 bailout. Ally has repaid $18 billion, or about $875 million more than the $17.2 billion in aid it received. The company went public again in April. Treasury sold a chunk of its stock and raised $2.38 billion in the offering.
The government currently owns a 13.8 percent stake. The new report estimates that taxpayers lost $1.8 billion on sales of Ally stock.
President Barack Obama said last year that top executives at the seven companies that received the biggest bailouts would have their annual cash salaries capped at $500,000. Any additional compensation would come from company stock that can’t be cashed in until the companies repay their bailouts.
The report said Treasury failed to comply with that limitation in approving executive pay for GM and Ally executives in 2013. Treasury put only a “minimal” amount of restricted stock into pay packages last year and eliminated it completely from 2014 packages, it said.
Patricia Geoghegan, the Treasury official who approved the raises, disputed the report’s findings. Geoghegan said that for all the seven companies receiving the most aid, Treasury has had to find a balance between limiting compensation and approving pay packages that are competitive with executives in similar jobs.
The government gave $352 billion in aid to those companies and recovered $377.6 billion, according to Treasury.
In a statement, Geoghegan said “the record shows that (her office) has fulfilled its obligation to balance limiting executive compensation with allowing companies to repay taxpayer assistance. Pay packages for the top 25 employees at each of those companies have been restricted so long as the company remained in TARP.”
In a letter to Romero, Geoghegan said that on average, the top 25 pay packages for Ally executives for 2014 are 17 percent cash and 83 percent stock, compared with a median for similar positions at similar companies of 51 percent cash and 49 percent stock.
On average, she said, 81 percent of executive pay at Ally and GM for 2013 was in the form of company stock, not cash. That means “the ultimate value” of most of the pay of top executives depends on the company’s future performance, generally over three years, she wrote. The CEOs of GM and Ally didn’t receive pay raises while they were under Treasury’s supervision, Geoghegan said.
GM said in a statement that it is grateful for the taxpayer aid it received. “While the U.S. Treasury owned GM stock and ever since, we have worked to align executive compensation with the long-term interests of stockholders and we will continue to do so,” the automaker said.
Ally said its executive compensation complies with government requirements for companies that received bailouts. More than 97 percent of Ally shareholders voted in July to approve its executive pay structure, the company said.