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Treasury Significantly Loosened Executive Pay Limits Resulting in
Excessive Pay for Top 25 Employees at GM and Ally (GMAC)
When the Companies Were Not Repaying TARP in Full and
Taxpayers Were Suffering Billions of Dollars in Losses

Report Number 14-001

September 24, 2014

Treasury Significantly Loosened Executive Pay Limits Resulting in Excessive
Pay for Top 25 Employees at GM and Ally (GMAC) When the Companies
Were Not Repaying TARP in Full and Taxpayers Were Suffering Billions of
Dollars in Losses

Summary
When Congress passed the Troubled Asset
Relief Program (“TARP”) and subsequent
economic stimulus legislation, it placed
limitations on executive compensation for
TARP recipients, and left it to the U.S.
Department of the Treasury (“Treasury”) to
implement the limitations. Treasury created
the Office of the Special Master for TARP
Executive Compensation (“OSM”). Kenneth
R. Feinberg served as the Special Master –
often called the pay czar – and was
succeeded by Patricia Geoghegan, currently
serving as the Acting Special Master. OSM
has jurisdiction over compensation at
companies that stood out from the more than
700 TARP recipients because of the amount
and nature of their exceptional bailout. OSM
sets pay for the Top 25 employees at these
TARP exceptional assistance recipients. The
Top 25 includes the 5 senior executive
officers and the next 20 most highly
compensated employees.
In January 2012 and January 2013, the
Office of the Special Inspector General for
the Troubled Asset Relief Program
(“SIGTARP”) reported on the results of its
evaluations of compensation set by Treasury
for Top 25 employees at companies that
received TARP help deemed exceptional.
SIGTARP’s reports highlighted that Treasury
had failed to rein in excessive pay and failed
to implement meaningfully SIGTARP’s
recommendations to develop robust criteria,
policies, and procedures to ensure it could
meet its own pay-setting guidelines.
In April 2013, shortly before the Acting
Special Master approved compensation for
Top 25 employees of the two remaining
companies that received exceptional TARP
assistance – Ally Financial Inc. (“Ally”) and
General Motors Corporation (“GM”) –
Representative Jim Jordan, Chairman of the
U.S. House Committee on Oversight and
Government Reform Subcommittee on
Economic Growth, Job Creation, and
Report Number 14-001

Regulatory Affairs, requested that SIGTARP
determine the number and value of pay
raises requested by Ally and GM and
approved by Treasury, and the companyproposed and Treasury-approved
compensation that exceeded Treasury’s paysetting guidelines. Shortly after receiving
Congress’ request, SIGTARP initiated this
evaluation with the specific objective to
assess the 2013 pay packages proposed by
the companies and the decisions made by
Treasury for compensation for the Top 25
employees at Ally and GM.

What SIGTARP Found
Overall, SIGTARP found Treasury
significantly loosened executive pay limits,
resulting in excessive pay for Top 25
employees at GM and Ally while the
companies were not repaying TARP in full
and taxpayers were suffering billions of
dollars in losses. Treasury also made limited
progress implementing recommendations
previously made by SIGTARP. These were
designed to promote good Government
practices, improve transparency,
consistency, and accountability and
ultimately protect taxpayers from subsidizing
excessive compensation at TARP
companies. In 2013, OSM continued
awarding excessive pay raises and only put
back a minimal amount of long-term
restricted stock as part of pay packages and
eliminated it altogether again in 2014 from
pay packages. In June 2013, OSM created
for the first time a written policy and
procedures. However, OSM’s policy merely
recites TARP legislation and the TARP
Standards for Compensation and Corporate
Governance; Interim Final Rule (“IFR,” or
“Treasury’s Rule”), both in existence prior to
the establishment of OSM, leaving OSM as
an office of Treasury that operates without
formal written policies developed by that
office. SIGTARP found that Treasury still
lacks robust policies, procedures, or criteria
to ensure that OSM’s guidelines are met.

September 24, 2014

Treasury Significantly Loosened Executive Pay Limits Resulting in Excessive
Pay for Top 25 Employees at GM and Ally (GMAC) When the Companies
Were Not Repaying TARP in Full and Taxpayers Were Suffering Billions of
Dollars in Losses
Both GM and Ally stood out from the other
five companies previously under OSM’s
jurisdiction. At the time OSM set pay for the
Top 25 employees at GM and Ally in
April 2013, SIGTARP found that pay set by
Treasury for Ally’s and GM’s top employees
did not reflect that those companies were not
repaying TARP in full after four years,
resulting in billions of dollars in taxpayer
losses. Moreover, at the time of Treasury’s
pay determinations, it was public knowledge
that the companies were not repaying TARP
in full and Treasury had already suffered an
$8.2 billion loss in GM, and Ally had made no
repayments of the principal TARP
investment. While Ally was under a
March 2013 failed stress test, taxpayers
suffered a loss of $845 million when Treasury
sold Ally common stock in the market. While
SIGTARP was conducting this evaluation,
Treasury sold its remaining TARP shares of
GM in the market to arrive at a total loss to
taxpayers of $11.159 billion, and sold some
additional Ally common stock in the market to
arrive at total losses of $1.8 billion.
In 2013, OSM approved cash salaries over
$500,000 for more than one-third (16 of 47)
of the top employees of GM and Ally. Year
after year, Treasury has loosened executive
pay limits, getting further and further away
from the President’s announced pay reforms
and pay limits used by Treasury in 2009,
even as taxpayer losses mount. The
President announced that top executives at
firms receiving extraordinary help from U.S.
taxpayers would have their compensation
capped at $500,000, with any additional
compensation in the form of stock that can’t
be paid up until taxpayers are paid back for
their assistance. Treasury, however, did not
limit additional compensation beyond
$500,000 to “stock that cannot be paid up
until taxpayers are paid back,” as the
President announced. For example, in 2013,
OSM approved effectively only 5% of Ally
employees’ compensation in the form of
long-term restricted stock and then
eliminated it entirely from Ally employees’
pay packages in 2014.

Report Number 14-001

Treasury’s mounting exceptions to its own
guideline restrictions on executive
compensation resulted by 2013 in OSM
moving further and further away from the
President’s announcement and OSM’s prior
guidelines. Instead of making meaningful
reforms to its process, OSM rolled back its
application of guidelines aimed at curbing
excessive pay, whereby approving high pay
driven by Ally and GM’s excessive pay
proposals without independent analysis and
under an ill-defined, pay-setting process that
lacked objective criteria.
SIGTARP found several examples
delineating OSM’s rolling back of guidelines.
For example, Treasury approved at least
$1 million in pay for every Top 25 employee
in 2013 and increased compensation by 28%
for GM and Ally Top 25 employees from
2009 to 2013. Treasury tripled the number of
GM and Ally employees who received cash
salaries exceeding $500,000 from 2009 to
2013 and allowed 89% of the employees to
be paid cash salaries of $450,000 or more in
2013. Treasury approved $3 million in pay
raises, ranging from 4% to 20%, for nine GM
employees in 2013, most of whom received
raises in consecutive years. Treasury also
continued to loosen time restrictions by a full
year for employees to cash out company
stock received as pay.
Additionally, in 2009, Treasury’s guideline
was to set pay to “generally not exceed the
50th percentile of total compensation for
similarly situated employees.” The pay
Treasury awarded most of the employees in
2013 exceeded the market median based on
comparable positions and companies as
determined by Treasury. Treasury set pay
for 88% (30 of 34 employees) of these
proposed employees, which exceeds market
medians. On an individual basis, these pay
packages exceeded market medians by
amounts ranging from $17,700 to
$2.7 million, for a total of $22.9 million. Of
the 30, Ally received 18 and GM received 12.
Treasury appears now to have done away
with this guideline because by 2014,

September 24, 2014

Treasury Significantly Loosened Executive Pay Limits Resulting in Excessive
Pay for Top 25 Employees at GM and Ally (GMAC) When the Companies
Were Not Repaying TARP in Full and Taxpayers Were Suffering Billions of
Dollars in Losses
Treasury set most of Ally’s pay between the
50th and 75th percentiles.
The pendulum in OSM’s pay decisions has
swung too far in the direction of keeping
companies competitive, without regard for
the fact that the reason to keep companies
competitive is so that they can repay
taxpayers in full, but GM and Ally were not
repaying taxpayers in full. Rather, taxpayers
have suffered billions of dollars in losses on
those TARP investments.
Two aspects of Treasury’s pay-setting
process and pay decisions serve as
important lessons learned. First, loosening
limits on executive compensation for
companies unable to repay TARP subjects
Treasury to criticism that is rewarding top
executives at companies that are losing
taxpayers’ money over the interests of the
taxpayers already shouldering billions of
dollars in losses on those investments.
Second, by setting pay further and further
away from the President’s and Treasury’s
announced limitations on executive
compensation for TARP company officials,
Treasury is missing an opportunity for critical
reforms to a material cause of the financial
crisis and a strong deterrent to future
bailouts.

Report Number 14-001

What SIGTARP Recommends
In this report, SIGTARP made 11
recommendations aimed at enhancing
OSM’s pay-setting process and pay
decisions. These recommendations include
maintaining improved documentation of OSM
and Treasury’s communications regarding
compensation, performing and documenting
independent analyses before OSM approves
company requests for cash salaries
exceeding $500,000, cash salaries
exceeding market medians, and annual pay
increases. SIGTARP also recommended
OSM use long-term restricted stock as part of
each employee’s compensation package to
ensure compensation is tied to both the
employee’s and the company’s performance,
and the full repayment of TARP funds.
Finally, SIGTARP recommended OSM
enhance its written procedures regarding
targeting median total compensation.
Treasury provided an official written
response to a draft of this report in a letter
dated September 21, 2014, which is
produced in full in Appendix I. Treasury did
not clearly agree to implement any of the
report’s recommendations, which were
intended to improve transparency and
program performance.

September 24, 2014

Treasury Significantly Loosened Executive Pay Limits Resulting in Excessive
Pay for Top 25 Employees at GM and Ally (GMAC) When the Companies
Were Not Repaying TARP in Full and Taxpayers Were Suffering Billions of
Dollars in Losses

Table of Contents
Background .................................................................................................................................................... 1
SIGTARP’s January 2012 Report Found that Treasury Approved Excessive Compensation for
TARP Recipients .................................................................................................................................... 3
SIGTARP’s January 2013 Report Found that Treasury Continues Approving Excessive
Compensation for TARP Recipients ....................................................................................................... 5
Treasury Made Limited Progress Since SIGTARP’s Last Report, but Did Not Make the
Meaningful Reforms Needed ...................................................................................................................... 8
Treasury-Approved Pay for Top Employees at GM and Ally Does Not Reflect that Those
Companies Were Not Repaying TARP in Full After Four Years, Resulting in Billions of
Dollars in Taxpayer Losses ................................................................................................................... 11
Treasury Has Loosened Executive Pay Limits Year After Year, Getting Further and Further Away
from the President’s Announced Pay Reforms and Pay Limits Used by Treasury in 2009, Even as
Taxpayer Losses Mount ............................................................................................................................ 16
In 2013, Treasury Approved at Least $1 Million in Pay for Every Top 25 Employee at GM and
Ally, and Approved Total Compensation that Was More Than 28% Higher Than 2009 Pay ................. 22
Treasury Tripled the Number of GM and Ally Employees Paid More than $500,000 in Guaranteed
Cash Salaries from 2009 to 2013 and Allowed 89% of the Employees To Be Paid Cash Salaries
of $450,000 or More ................................................................................................................................. 24
In 2013, Treasury Approved $3 Million in Pay Raises for Nine GM Employees, Most of Whom
Received Pay Raises in Consecutive Annual Years ............................................................................. 26
Conclusion .................................................................................................................................................... 35
Recommendations ........................................................................................................................................ 42
Appendix A – Objective, Scope, and Methodology..................................................................................... 45
Appendix B – Treasury 2013 Pay Determinations for Ally ......................................................................... 47
Appendix C – Treasury 2013 Pay Determinations for GM ......................................................................... 48
Appendix D – Treasury 2014 Pay Determinations for Ally......................................................................... 49
Report Number 14-001

September 24, 2014

Treasury Significantly Loosened Executive Pay Limits Resulting in Excessive
Pay for Top 25 Employees at GM and Ally (GMAC) When the Companies
Were Not Repaying TARP in Full and Taxpayers Were Suffering Billions of
Dollars in Losses
Appendix E – OSM-Approved Total Pay over Market Medians in 2013 .................................................... 50
Appendix F – Status on Each of SIGTARP’s Seven Recommendations ..................................................... 51
Appendix G – Acronyms and Abbreviations ............................................................................................... 53
Appendix H – Evaluation Team Members ................................................................................................... 54
Appendix I – Management Comments......................................................................................................... 55

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

1

Background
When Congress authorized the Troubled Asset Relief Program (“TARP”), it
required that TARP recipients abide by certain rules on executive compensation,
rules that it left to the U.S. Department of the Treasury (“Treasury”) to
promulgate. Limits on executive compensation at TARP recipients are important
for several reasons. First, limits on executive compensation for TARP companies
are a tradeoff for the bailout because taxpayers are subsidizing TARP companies.
As stated by former Treasury Special Master for TARP Executive Compensation
(“Special Master”) Kenneth R. Feinberg in his book, Who Gets What: Fair
Compensation after Tragedy and Financial Upheaval (“Who Gets What”):
Congress could not stand idly by and accept a one-way bargain
with Wall Street. There would have to be a price to pay for such
Congressional largesse….If Main Street was required to come to
Wall Street’s rescue, there would be a price to pay: leaders in
Congress and the new Obama administration didn’t want to see
headlines discussing how financial “fat cats” were collecting
outrageous salaries from companies supported by taxes of ordinary
citizens.
Second, limits on executive compensation at TARP companies serve as important
reforms to a material cause of the financial crisis and a possible deterrent to future
bailout requests. Former Treasury Secretary Timothy F. Geithner said that
executive compensation played a material role in causing the financial crisis
because it encouraged excessive risk taking. Congress specifically required in the
TARP authorizing legislation that institutions in TARP abide by certain rules on
executive compensation intended to avoid excessive risks.
On February 4, 2009, the President held a press conference with former Treasury
Secretary Timothy F. Geithner announcing reforms, including new limits on pay,
stating:
We are going to be demanding some restraint in exchange for
federal aid so that when firms seek new federal dollars, we won’t
find them up to the same old tricks. As part of the reforms we’re
announcing today, top executives at firms receiving extraordinary
help from U.S. taxpayers will have their compensation capped at
$500,000, a fraction of the salaries that have been reported
recently. And if these executives receive any additional
compensation, it will come in the form of stock that can’t be paid
up until taxpayers are paid back for their assistance.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

2

Seven companies had received TARP help deemed “exceptional” – because the
amount and nature of their bailouts stood out from the more than 700 other TARP
recipients. Those were American International Group, Inc. (“AIG”), Bank of
America Corporation (“Bank of America”), Citigroup Inc. (“Citigroup”), Chrysler
Financial Services Americas LLC (“Chrysler Financial”), Chrysler Holding LLC
(“Chrysler”), General Motors Corporation (“GM”), and Ally Financial Inc.
(“Ally”), formerly General Motors Acceptance Corp. (“GMAC Inc.”). Thirteen
days after the President’s announcement, Congress enacted the American
Recovery and Reinvestment Act of 2009 (“the Recovery Act”), which among
other things, limited bonuses for the Top 251 employees at TARP institutions
(depending on the amount of TARP investment) unless paid in restricted stock
that did not exceed one-third of total compensation.
Responsible for promulgating rules limiting executive compensation for TARP
companies, Treasury, through a rule known as the TARP Standards for
Compensation and Corporate Governance; Interim Final Rule (“IFR,” or
“Treasury’s Rule”), created the Office of the Special Master for TARP Executive
Compensation (“OSM”), but gave it limited scope. OSM sets the annual pay for
the Top 25 most highly paid employees at the seven TARP exceptional assistance
companies, until the company is no longer in TARP.2 Treasury’s Rule articulated
the following six principles for OSM:








Risk – the compensation structure should avoid incentives to take unnecessary
or excessive risks that could threaten the value of the TARP recipient;
Taxpayer Return – the compensation amount and structure should reflect the
need for the TARP recipient to remain a competitive enterprise, to retain and
recruit talented employees who will contribute to the TARP recipient’s
success, and ultimately, its ability to repay TARP obligations;
Appropriate Allocation – the compensation structure should appropriately
allocate compensation between components such as salary and short-term and
long-term incentives;
Performance-based Compensation – an appropriate portion of the
compensation should be based on performance metrics over a relevant period;
Comparable Structures and Payments – the compensation amount and
structure should be consistent with those for persons in similar positions or
roles “at similar entities that are similarly situated”; and
Employee Contribution to TARP Recipient Value – the compensation
structure and amount should reflect the current or prospective contributions of
an employee to the value of the TARP recipient.

1

The Top 25 includes the 5 senior executive officers and the next 20 most highly compensated employees. Members of
the Top 25 may vary from year to year.
2
The Special Master also approves compensation structures, rather than individual pay, for the next 75 most highly
compensated employees.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

3

SIGTARP’s January 2012 Report Found that Treasury Approved
Excessive Compensation for TARP Recipients
On January 23, 2012, the Office of the Special Inspector General for the Troubled
Asset Relief Program (“SIGTARP”) issued a report over how Treasury’s OSM set
pay for the Top 25 employees at the seven TARP companies under OSM’s
jurisdiction. SIGTARP reported that Former Special Master Kenneth R.
Feinberg, who served as Treasury’s Special Master from June 15, 2009, to
September 10, 2010, stated that the six principles contained in Treasury’s Rule are
inherently inconsistent, and therefore he determined pay for Top 25 employees in
a three-step methodology using what he called “prescriptions,” or guidelines.

OSM Determined Pay for the Top 25 Employees in a Three-Step Methodology
First, OSM sets total compensation on the OSM prescription that it should
generally not exceed the 50th percentile of total compensation for similarly
situated employees. The first step in the formula was to determine each
employee’s total compensation by basing it on the 50th percentile compensation
level for the employee’s position, scope, and responsibilities relative to what their
peers in comparable positions are earning. To determine the 50th percentile,
OSM uses the U.S. Mercer Benchmark Database and Equilar’s ExecutiveInsight
Total Compensation Report to determine whether the market data submitted by
the TARP companies were reasonable.
Second, OSM sets cash salaries using an OSM prescription that salaries
generally should not exceed $500,000 per year, except for good cause shown.
As reported in SIGTARP’s January 2012 report, OSM staff told SIGTARP that
the $500,000 cash salary limit was based partially on President Obama’s
statement that salaries should be limited to $500,000. Former Special Master
Feinberg told SIGTARP that he made the decision to limit cash salaries to
$500,000 and to increase the proportion of compensation in the form of stock to
strike a balance between reducing excessive risk and providing enough
compensation to keep employees’ “skin in the game.”
Third, OSM determines how much of the remaining compensation would be
paid in stock salary with a value dependent on the company’s future success
and long-term restricted stock. OSM determined the amount of stock salary
and long-term restricted stock by deducting the cash salary from total
compensation. The Recovery Act limited long-term restricted stock to one-third
of the employee’s total pay. Under the process set up by former Special Master
Feinberg, OSM calculated the amount of long-term restricted stock, and the
remainder of the compensation package was salary in the form of company stock
(called “stock salary”), which vests immediately upon grant.
Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

4

As reported in SIGTARP’s January 2012 report, to tie individual compensation to
long-term company success, OSM used long-term restricted stock contingent on
the employee achieving specific performance criteria. Long-term restricted stock
does not fully vest until the repayment of TARP financial assistance. As reported
in SIGTARP’s January 2012 report, OSM officials then told SIGTARP that
companies were very hesitant to pay long-term restricted stock because there was
no certainty that some of the companies would ever be free of TARP.
SIGTARP concluded in its January 2012 report that the Special Master could not
effectively rein in excessive compensation because he was under the constraint
that his most important goal was to get the companies to repay TARP. Given
OSM’s overriding goal, the seven companies had significant leverage over OSM
by proposing and negotiating for excessive pay packages, warning Special Master
Feinberg that if he did not provide competitive pay packages, top officials would
leave and go elsewhere, a claim that he said, at that time, did not come true as
85% of the people were still at the companies.3 SIGTARP reported that, although
generally OSM limited cash compensation and made some reductions in pay,
OSM still approved total compensation in the millions. SIGTARP found that,
although the Special Master created a prescription that cash salaries should not
exceed $500,000 except for good cause, OSM was inconsistent in approving cash
salaries in excess of $500,000.
SIGTARP also reported that getting out from under the Special Master’s purview
was a factor for repayment of TARP exceptional assistance by Bank of America
and Citigroup. Both companies were subject to OSM’s determinations only from
October 2009 to December 2009. Citigroup officials told SIGTARP that, from
the beginning, Citigroup’s perspective was that it would be subject only to the
Special Master’s determinations for 2009. SIGTARP’s September 29, 2011, audit
report, “Exiting TARP: Repayments by the Largest Financial Institutions,”
reported that Citigroup’s CEO told SIGTARP that the desire to escape
management compensation restrictions was a factor motivating Citigroup’s desire
to exit TARP. Two of Bank of America’s former executives also told SIGTARP
that executive compensation was an important factor in the firm’s decision to
repay TARP. One of the executives told SIGTARP that executive compensation
was a major factor behind the firm’s repayment decision and that the company did
everything possible to get out from under the executive compensation rules. Once
these two banks exited the exceptional assistance TARP programs and OSM’s
jurisdiction, salaries and bonuses climbed.

3

Former Special Master Feinberg wrote in his book that it was not clear that the departure of the 15% who left was tied
to compensation.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

5

SIGTARP made three formal recommendations in the January 2012 report:




To ensure that OSM consistently grants exceptions to the $500,000 cash
salary cap, OSM should substantiate each exception requested and whether
the requests demonstrate or fail to demonstrate “good cause.”
OSM should better document its use of market data in its calculations.
OSM should develop more robust policies, procedures, or guidelines to help
ensure that its pay determination process and its decisions are evenhanded.
These measures will improve transparency and help OSM consistently apply
Treasury’s principles of “appropriate allocation,” “performance-based
compensation,” and “comparable structures and payments.”

SIGTARP’s January 2013 Report Found that Treasury Continues
Approving Excessive Compensation for TARP Recipients
After issuing the January 2012 report and three formal recommendations,
SIGTARP conducted a follow-up review, issuing a report in January 2013,
finding that Treasury had again failed to rein in excessive pay. In January 2013,
SIGTARP reported that, even though OSM set guidelines aimed at curbing
excessive pay, SIGTARP previously warned that Treasury lacked robust criteria,
policies, and procedures to ensure those guidelines are met. Despite SIGTARP’s
prior report, Treasury made no meaningful reform to its process. Absent robust
criteria, policies, and procedures to ensure its guidelines were met, OSM’s
decisions were largely driven by the pay proposals of the same companies that
historically, and again in 2012, proposed excessive pay.
With the companies exercising significant leverage, Acting Special Master
Patricia Geoghegan rolled back OSM’s application of guidelines aimed at curbing
excessive pay. SIGTARP reported that OSM awarded $6.2 million in pay raises
to 18 of the 18 employees for whom the companies proposed raises. SIGTARP
reported that OSM awarded cash salaries of $500,000 or more to 70% of the
executives under OSM’s pay-setting jurisdiction and allowed 94% of the top
employees to be paid cash salaries of $450,000 or more. SIGTARP reported that
OSM removed long-term, incentive-based stock as requested by the companies.
SIGTARP found that, although OSM bettered its documentation of the employees
awarded more than a $500,000 cash salary, OSM did not “substantiate” that high
cash salary, but instead listed a justification that largely parroted what each
company asserted to OSM without an OSM independent analysis.
SIGTARP reported in January 2013 that OSM is effectively relinquishing some of
OSM’s authority to the companies that have their own best interests in mind.
OSM’s job is to look out for the interests of taxpayers, which it cannot do if it
continues to rely to a great extent on the company’s proposals and justifications.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

6

In January 2013, SIGTARP reported that guidelines aimed at curbing excessive
pay are not effective, absent robust policies, procedures, or criteria to ensure that
the guidelines are met; however, OSM still did not have robust policies,
procedures, or criteria to ensure that pay for executives at TARP exceptional
assistance companies stays within OSM guidelines. SIGTARP reported that
perhaps the Acting Special Master thinks that OSM has already succeeded in
achieving its mission by limiting compensation for these executives from preTARP levels, but the question is whether OSM’s existing policies are sufficient
for taxpayers.
SIGTARP found in January 2013 that Treasury continues to award excessive pay
packages, including large guaranteed cash salaries, but meaningful reform was
still possible because GM and Ally remained under OSM’s jurisdiction.
SIGTARP ended the report with a warning that without meaningful reform,
including independent analysis by OSM, Treasury risks that TARP companies
could potentially misuse taxpayer dollars for excessive executive compensation.
SIGTARP made four recommendations in the January 2013 report:






Each year, Treasury should reevaluate total compensation of executives at
TARP exceptional assistance companies remaining in the Top 25 from the
prior year, including determining whether to reduce total compensation.
To ensure that Treasury effectively applies guidelines aimed at curbing
excessive pay and reducing risk taking, Treasury should develop policies,
procedures, and criteria for approving pay in excess of Treasury guidelines.
Treasury should independently analyze whether good cause exists to award a
Top 25 employee a pay raise or a cash salary over $500,000. To ensure that
OSM has sufficient time to conduct this analysis, Treasury should allow OSM
to work on setting Top 25 pay prior to OSM’s receiving the company pay
proposals, which starts the 60-day timeline.
To be consistent with Treasury’s Rule that the portion of performance-based
compensation compared to total compensation should be greater for positions
that exercise higher levels of responsibility, Treasury should return to using
long-term restricted stock for employees, particularly senior employees such
as CEOs.

Representative Jim Jordan, Chairman of the U.S. House Committee on Oversight
and Government Reform Subcommittee on Economic Growth, Job Creation, and
Regulatory Affairs, requested that SIGTARP evaluate the 2013 companyproposed and Treasury-approved pay packages for the two remaining companies
in TARP that had received exceptional financial assistance – Ally and GM.
Chairman Jordan specifically asked SIGTARP to determine the number and value
of pay raises requested by Ally and GM and approved by Treasury, and the
company-proposed and Treasury-approved compensation that exceeded

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

7

Treasury’s pay-setting guidelines. In April 2013, shortly before the Acting
Special Master approved compensation for Ally and GM employees, SIGTARP
initiated this evaluation with the specific objective to assess the 2013 pay
packages proposed by the companies and the decisions made by Treasury for
compensation for the Top 25 employees at Ally and GM. SIGTARP conducted
this evaluation between April 2013 and September 2014 in accordance with the
“Quality Standards for Inspection and Evaluation” established by the Council of
the Inspectors General on Integrity and Efficiency. For a discussion of the
evaluation’s scope and methodology, see Appendix A.
While SIGTARP was conducting this review, in December 2013, GM exited
TARP, but not by repaying TARP. Instead, Treasury decided to sell its remaining
shares of GM common stock at a loss. Taxpayers suffered an $11.159 billion loss
on its TARP investment in GM. In November 2013, Ally repurchased from
Treasury certain securities called mandatorily convertible preferred shares. In
January 2014, Treasury sold shares of Ally common stock in the market at a loss
of $845 million. On April 2, 2014, Treasury’s OSM issued 2014 pay decisions
for the Top 25 employees at Ally, the last company under OSM’s jurisdiction.
Days later, on April 15, 2014, Treasury sold additional Ally stock in the market at
a loss of $918 million.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

8

Treasury Made Limited Progress Since
SIGTARP’s Last Report, but Did Not Make
the Meaningful Reforms Needed
Treasury made some progress after SIGTARP’s last report, which SIGTARP
credits, although much more is needed to implement six of SIGTARP’s seven
recommendations, which are designed to protect taxpayers from subsidizing
excessive compensation at TARP companies and through reforms of executive
compensation practices that contributed to the financial crisis.


Awarding Pay Raises: After SIGTARP raised concerns that OSM awarded
pay raises to 18 of the 18 employees for whom the companies had requested
raises for 2013 pay, OSM did not award pay raises to every employee for
whom the companies requested. OSM denied pay raises to three GM
employees new to GM’s Top 25 for whom the company had requested a raise,
and denied pay raises to three Ally employees where the company had
requested a raise. However, in 2013, OSM still awarded pay raises to each of
the nine GM employees for whom GM had requested a raise and where the
employee was in the Top 25 the prior year, and one GM employee in 2013
(after OSM issued GM’s determination letter).



Removing Long-Term Restricted Stock: After SIGTARP raised concerns
that in 2012 OSM had removed long-term restricted stock as part of pay for all
Ally employees and for some GM employees and made a recommendation
that Treasury return to using long-term restricted stock, in 2013 OSM put
back long-term restricted stock, but only by a small amount (effectively 5%),
then eliminated it from all pay packages in 2014.



Lacking Robust Policies, Procedures, Guidelines, and Criteria: After
SIGTARP raised concerns about OSM’s lack of written policies, procedures,
guidelines, and criteria, for the first time in the history of OSM, in June 2013,
Treasury created a written policy and procedures (including guidelines).
However, SIGTARP found that this policy and those procedures were not
robust or complete and failed to address all of the concerns raised by
SIGTARP in prior reports or all of SIGTARP’s recommendations. They
appeared instead to be an attempt at some documentation of what OSM had
done historically without meaningful change as recommended by SIGTARP.
o OSM’s policy consists of 2½ pages that merely recite TARP legislation
and Treasury’s Rule (the IFR), both in existence prior to the existence of
OSM, rather than recite any of the office’s policies. Accordingly, OSM is
an office of Treasury that operates without meaningful formal written

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

9

policies that should have been developed by the office. By any measure of
oversight, that should not be acceptable.
o OSM’s policy and procedures better document how the companies provide
OSM market data and information and that OSM reviews the companyprovided market data for accuracy (as SIGTARP recommended), but fails
to address whether OSM continues to follow prior OSM guidance to set
total compensation to generally not exceed the 50th percentile. OSM’s
determination letters instead discuss targeting cash compensation (not total
compensation) at the 50th percentile; however, OSM’s policy and
procedures are silent on this issue.
o OSM’s written policy and procedures (including guidelines) are silent on
how OSM evaluates company requests for pay raises, a concern
previously raised by SIGTARP with no meaningful reform. There appears
to be no consistent criteria for who gets a pay raise and who does not.
SIGTARP found that Treasury documentation was only slightly better
than last year when OSM essentially parroted the company’s explanation
for the pay raise. OSM’s documentation does not rise to the level of what
SIGTARP recommended because it does not show that Treasury
conducted independent analysis on whether good cause exists to award a
pay raise beyond the company’s explanation and where the person’s pay
falls in relation to the median.
o OSM’s policy and procedures do not include independent analysis that
OSM conducts or criteria that OSM considers to award cash salaries
greater than $500,000.
o OSM’s policy and procedures do not include criteria that OSM considers
to remove long-term restricted stock, how much long-term restricted stock
to award, or whether Treasury would award a greater portion of long-term
restricted stock for positions that exercise higher levels of responsibility
(as stated in Treasury’s Rule and SIGTARP’s recommendation).
o After SIGTARP raised concerns that Treasury should reconsider pay each
year, including whether to reduce pay rather than maintain or increase pay
as OSM had done in the past, OSM included in its policy and procedures
that OSM may reduce pay; however, OSM did not address guidelines or
criteria it would consider in reducing pay.

The Acting Special Master continues to state that OSM has implemented
SIGTARP’s recommendations, and SIGTARP continues to tell Treasury and
Congress in every SIGTARP Congressional report published quarterly that

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

10

SIGTARP considers only one of its recommendations to OSM to be implemented
(better documentation of OSM’s use of market data), why that is the case, and
what SIGTARP would expect to see for implementation of its recommendations.
The Acting Special Master simply cannot unilaterally determine that the
recommendation has been implemented in the face of SIGTARP disagreement.
Treasury has not taken sufficient meaningful action to address serious concerns
raised by SIGTARP of excessive Treasury-approved pay and to implement
SIGTARP recommendations. OSM continues to lack robust policies, procedures,
and criteria, which would hold OSM accountable to its guidelines that OSM
created in the public interest. SIGTARP is extremely concerned that Treasury is
allowing OSM to not fully implement SIGTARP’s recommendations. OSM has
started to document its process and procedures.4 However, it is clear, based on
statements by OSM officials to SIGTARP and OSM’s determination letters, that
OSM continues to use criteria for decision making not captured in its formal
policy and procedures. It is unclear whether this is objective or subjective criteria
proposed by the companies.

Why this matters:
OSM is supposed to be acting in the public interest to limit excessive
compensation at these two TARP companies. OSM meets with company officials
and senior Treasury officials, all of which is undocumented, before making its
decisions on pay. The importance of oversight over this process is critical to
protect taxpayers. SIGTARP’s reports and recommendations represent another
voice, the voice of taxpayers who fund TARP. SIGTARP’s recommendations are
designed to promote good Government practices, improving transparency,
consistency, and accountability, and ultimately ensure that taxpayers are not
subsidizing excessive pay at TARP companies. SIGTARP believes a lack of
robust criteria, policies, and procedures to ensure that OSM’s guidelines are met
leads to a lack of transparency, inconsistency, and ultimately a lack of
accountability to taxpayers because pay decisions are made more based on the
company proposals and assertions rather than independent objective criteria
designed to protect taxpayers. That is what OSM is doing, deciding which of the
company’s proposals it will accept, with the companies each year requesting more
and more pay with fewer and fewer restrictions. That may be how compensation
committees work at private companies, but it is not good Government practice.
Good Government requires objective criteria and procedures to ensure that
guidelines designed to protect taxpayers are adhered to, rather than gutted by
exception after exception.

4

Acting Special Master Geoghegan told SIGTARP that OSM told SIGTARP that it used the same pay-setting process
for 2013 that it had used in prior years.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

11

Treasury-Approved Pay for Top Employees at
GM and Ally Does Not Reflect that Those
Companies Were Not Repaying TARP in Full
After Four Years, Resulting in Billions of Dollars
in Taxpayer Losses
By 2013, Treasury’s OSM had an incredibly narrow job: (1) to set individual pay
for the Top 25 most highly paid employees at the only two major companies left
in TARP – GM and Ally; and (2) to set compensation structures, rather than
individual pay, for the next 75 most highly paid employees at GM and Ally. Both
GM and Ally stood out from the other five companies previously under OSM’s
jurisdiction because they were still in TARP after four years, they were not
repaying TARP in full, resulting in taxpayer losses on the TARP investment and
Government estimates of billions of dollars in losses. At the time OSM set pay
for top employees at GM and Ally in April 2013, Treasury had already written off
$8.2 billion in losses on the TARP investment, and Ally had not repaid any
principal. Instead, Treasury had sold some securities in a March 2011 public
offering. However, OSM’s documentation of its process for setting pay, and the
pay OSM set for GM and Ally for 2013, do not reflect the differences. At the
time OSM set pay for top Ally employees in April 2014, Ally had repurchased
some mandatorily convertible preferred stock from Treasury, and taxpayers had
suffered more than an $845 million loss on selling Ally stock in the market.
One of the six broad principles under which OSM operates is taxpayer return, and
OSM has consistently touted as a measure of OSM’s success the positive returns
to taxpayers from the other five TARP exceptional assistance recipients. For
example, in February 2013, at a hearing of the House Committee on Oversight
and Government Reform, Acting Special Master Patricia Geoghegan testified:
In December 2012, AIG exited TARP, and the Federal Reserve
and Treasury received back the entire $182 billion of assistance
that AIG had received…with a total positive return of
$22.7 billion. So, it is that kind of result that we are working for
when we set our pay packages in our determination letter process.
Despite Treasury’s articulating six principles, according to OSM, return to
taxpayers of the TARP funds is OSM’s primary objective. On October 21, 2010,
at a hearing of the Congressional Oversight Panel, former Special Master
Feinberg testified that Treasury’s primary objective was to get taxpayers’ money
back when setting compensation. He testified before the Congressional Oversight
Panel on October 21, 2010:

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

12

Congress felt that the single most important thing I could do is get
those seven companies to repay the taxpayer….Secretary Geithner
made that clear. Congress made that clear. The Administration
made that clear. And we succeeded, with three of those companies
already repaying.
Former Special Master Feinberg recounts in his book:
[T]he secretary made clear that my primary goal as Treasury’s
special master for TARP executive compensation was to determine
payments for senior corporate officials that would maximize the
likelihood that the designated companies would repay TARP loans
as quickly as possible. The taxpayers had to be made whole. This
was the top priority.
Although OSM measures success on a company fully repaying TARP, it is silent
when taxpayers have not been made whole, have suffered losses, and are
estimated by the Government to take future billions of dollars in losses, as was the
case with GM and Ally in 2013 and continues with Ally in 2014. OSM’s
April 2013 letter to GM setting 2013 pay states: “Including proceeds from the
sale of GM common stock held by Treasury, GM’s repayments totaled
approximately $30.4 billion as of the end of March 2013.” However, Treasury
selling stock into the market does not constitute repayment by GM nor does
selling back to GM at a substantial loss constitute a repayment in full of the debt
by GM. Moreover, Treasury sold that stock at a loss of billions of dollars. Unlike
prior OSM press releases touting returns to taxpayers, OSM’s press release
highlights that GM exited TARP without highlighting the cost at which GM
exited TARP – an $11.2 billion loss to taxpayers. OSM’s April 2, 2014, press
release discusses that Ally has repaid $15.3 billion, or 89%, of the $17.2 billion
investment to Ally, without disclosing that these did not fully consist of
repayments of the principal by the company and that taxpayers had suffered
$845 million in losses from stock sales during this time period by Treasury on the
Ally TARP investment.
OSM cannot use repayment of the TARP investment to tout its success without
taking responsibility for the lack of repayment by the company and TARP losses
to taxpayers by companies under OSM’s jurisdiction. Treasury’s sale of company
stock into the market is not the same as repayment by the company of its debt in
full. It was public knowledge when OSM set 2013 pay and 2014 pay that the
Government estimated a loss on the remaining GM stock and Ally stock held by
Treasury in exchange for the TARP investment. When OSM set pay for 2013, the
Congressional Budget Office and the Office of Management and Budget
estimated that Treasury’s losses on the auto bailout were at $20 billion and
$25 billion, respectively. Given that, as of March 31, 2014, taxpayers saw a

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

13

$2.9 billion loss in Chrysler and no loss from Chrysler Financial, losses from
Treasury’s investments in GM and Ally would account for most of Treasury’s
$14.9 billion loss for the auto industry bailout. In 2013, Treasury continued to
sell its GM stock well below its break-even prices and ultimately made its final
sale in December 2013, which left taxpayers losing a total of $11.2 billion in GM.
In 2014, Treasury continued to sell Ally stock at a loss, including days after OSM
set 2014 pay. Taxpayers have already suffered a loss of approximately
$1.8 billion on the TARP investment in Ally.
OSM’s policy and procedures do not provide any guidelines or criteria for taking
into account a company’s lack of repayment of the initial TARP investment or
whether Treasury was taking a loss on that investment. If return to taxpayers is
the primary objective of Treasury’s OSM and a key metric of success, then
policies, procedures, and guidelines should reflect how Treasury treats a lack of
repayment by the company, as well as actual and estimated losses to taxpayers on
the principal TARP investment. Moreover, despite being bound by a principle
that compensation amount and structure should be consistent with those for
persons in similar positions or roles “at similar entities that are similarly situated,”
OSM’s policy, procedures, and guidelines do not reflect GM’s and Ally’s unique
situation as the last two large TARP recipients that remained in TARP in 2013, or
that Ally is the last large TARP recipient in 2014.
When OSM set 2013 pay for GM’s Top 25 employees in April 2013, it was public
knowledge that GM was not repaying TARP in full and that Treasury had already
suffered a loss of more than $8.2 billion on its TARP investment in GM.
In November 2010, Treasury made two sales of GM stock into the market, selling
412.3 million shares at a loss of $4.3 billion. Treasury sold the shares at an
average price of $32.75 per share despite the fact that Treasury’s break-even price
was $44.59 and $52.27 per share for the two sales, respectively. In
December 2012, Treasury agreed to allow GM to buy back 200 million shares at a
$3.2 billion loss to taxpayers. GM paid $27.50 per share despite the fact that
Treasury’s break-even price at that time was $53.98 per share. Between January
and April 2013, Treasury continued to sell GM stock into the market and
continued losing money on the investment, losing more than $900 million. As
shown in the following table, Treasury continued to take losses for taxpayers by
selling its GM common shares at prices well below Treasury’s break-even prices
from November 18, 2010, the date of GM’s initial public offering, until Treasury
sold its last remaining shares of GM common stock on December 9, 2013.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

14

FIGURE 1

COMPARISON OF TREASURY’S BREAK-EVEN AND SALES PRICES FOR GM STOCK

Source: SIGTARP analysis of Treasury’s February 19, 2014, Transaction Report.

When OSM set 2013 pay for Ally’s Top 25 employees in April 2013, it was public
knowledge that Ally was not repaying TARP in full, and soon after taxpayers
suffered significant losses.
Treasury continued to approve Ally’s requests for excessive pay in 2013 despite
Ally’s failing the Federal Reserve Board’s (“FRB”) stress test and not repaying
taxpayers. On March 7, 2013, while Treasury was determining Ally’s 2013
compensation, FRB announced Ally had insufficient capital to withstand a severe
economic downturn and, therefore, Ally failed FRB’s stress test. Ally was the
only company of 18 of the largest bank holding companies (those with $50 billion
or more in total consolidated assets) to fail FRB’s capital adequacy test. In
March 2011, Treasury generated approximately$2.7 billion in proceeds from
selling Ally trust preferred securities in the market, not from a repayment by Ally.
As of March 31, 2013, when OSM was setting pay for Ally, Ally had not made
any repayments on the TARP principal investment. When OSM was setting pay

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

15

for Ally for 2014, taxpayers had already taken significant losses of more than
$845 million from Treasury selling Ally stock into the market.

Why this matters:
Treasury’s pay decisions suggest that the principle of “repayment of TARP”
inures to the benefit of top executives at TARP companies when Treasury sets
pay. According to Feinberg’s book, taxpayer return was Secretary Geithner’s
primary concern, described as:
[C]ompensation should reflect the need for the company to recruit
and retain key employees so the company ultimately could repay
every cent borrowed. Pay back the taxpayers – with interest. Every
company subject to my jurisdiction, and much of the Treasury
bureaucracy, referenced this variable in urging the special master
to be generous when it came to compensation.
If Treasury wants to use “repayment of TARP” as a factor to approve “generous”
pay, then the lack of repayment of every cent borrowed of TARP by GM and Ally
should likewise be reflected by Treasury to limit or maintain pay, but not to
loosen restrictions on pay. The goal, according to both Special Masters, was
repayment in full to taxpayers, not losses. When Treasury was taking losses on its
investment in GM, and Ally had not repaid taxpayers and was failing the stress
tests, Treasury was rewarding the most highly paid GM and Ally employees with
multimillion-dollar pay, pay raises, high guaranteed cash salaries, and little to no
pay tied to long-term individual performance metrics. Taxpayers are already
subsidizing losses on TARP investments in these companies and should not be
forced by Treasury to subsidize excessive executive compensation.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

16

Treasury Has Loosened Executive Pay Limits
Year After Year, Getting Further and Further
Away from the President’s Announced Pay
Reforms and Pay Limits Used by Treasury in
2009, Even as Taxpayer Losses Mount
Year after year, OSM is awarding pay to top executives at TARP companies that
gets further and further away from the President’s 2009 announced reforms:
The President’s Announcement:
As part of the reforms we’re announcing today, top executives at
firms receiving extraordinary help from U.S. taxpayers will have
their compensation capped at $500,000, a fraction of the salaries
that have been reported recently. And if these executives receive
any additional compensation, it will come in the form of stock that
can’t be paid up until taxpayers are paid back for their assistance.
Treasury approved cash salaries over $500,000 in 2013 for more than one-third
(16 of 47) of the top employees of GM and Ally.
In addition, the President announced that additional compensation would come in
the form of stock that could not be paid up until taxpayers are paid back for their
assistance. That form of stock is long-term restricted stock. However, in 2012,
OSM removed long-term restricted stock from the pay packages of all Ally
employees and some GM employees. After SIGTARP reported on OSM’s
removal of that stock and Congress held a hearing on SIGTARP’s report, OSM
gave extremely limited long-term restricted stock in 2013 (effectively 5% to Ally
employees), only to eliminate it in 2014. Treasury is not limiting additional
compensation beyond $500,000 to “stock that cannot be paid up until taxpayers
are paid back,” as the President announced.

Why this matters:
OSM’s continued position that there is nothing requiring it to follow the
President’s announcement misses the point because the President’s announcement
was just as he stated – a reform – an important reform designed to combat one of
the material causes of the financial crisis and provide a possible deterrent to future
bailout requests. As stated by the President: “We are going to be demanding
some restraint in exchange for federal aid so that when firms seek new federal
dollars, we won’t find them up to the same old tricks.” First, it does raise the

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

17

question of who OSM believes is responsible for implementing the President’s
announcement, if not OSM. The bigger issue is that OSM’s failure to follow
reforms could have the unfortunate effect of ending up in the same place that
required reforms in the first place.
OSM’s Guidelines:
The pay awarded by OSM also appears to no longer follow Treasury’s 2009 and
2010 guidelines created by former Special Master Feinberg. In SIGTARP’s 2012
report, given that OSM did not have robust policies and procedures, SIGTARP
reported on OSM’s methodology called “prescriptions,” or guidelines, as
described by OSM officials to SIGTARP as follows:
First, OSM sets total compensation on the OSM prescription
that it should generally not exceed the 50th percentile of total
compensation for similarly situated employees.
Second, OSM sets cash salaries using an OSM prescription
that generally salaries should not exceed $500,000 per year,
except for good cause shown.
Third, OSM determines how much of the remaining
compensation would be paid in stock salary with a value
dependent on the company’s future success and long-term
restricted stock.

OSM no longer appears to follow these three guidelines.
50th Percentile: OSM’s prior guideline was to determine each employee’s total
compensation by generally not exceeding the 50th percentile compensation level
for the employee’s position, scope, and responsibilities relative to what their peers
in comparable positions are earning.5 As SIGTARP reported in its 2012 report,
OSM officials told SIGTARP that companies pushed back on the 50th percentile
but, “if they were better than the 50th percentile, they wouldn’t be having
discussions with OSM in the first place.” OSM appears to have abandoned its
guideline that pay generally not exceed the 50th percentile of total compensation
for similarly situated employees. The 50th percentile does not appear anywhere in
OSM’s June 2013 policy and procedures.

5

The companies supply the market data to OSM, which determines the 50th percentile. OSM checks this data for
accuracy.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

18

OSM no longer appears to be following Treasury’s guideline that total
compensation generally not exceed the 50th percentile. In 2013 and 2014, OSM
set pay for most of the Top 25 employees at Ally above the 50th percentile.
Given that Ally is the only company remaining under OSM’s jurisdiction, OSM
no longer follows the original guideline that total pay generally not exceed the
50th percentile.
SIGTARP found OSM’s policy and procedures to be confusing and applied
inconsistently, making oversight difficult and lending to a lack of accountability
of OSM. Cash salaries are a prime example of how a lack of robust policies,
procedures, guidelines, and criteria can lead to Treasury going along with
company requests for excessive pay without adhering to OSM’s own objective
criteria. For example, although OSM’s policy and procedures are silent as to the
50th percentile previously used by OSM under Special Master Feinberg to
determine total compensation, OSM’s April 2013 pay determination letters to the
companies state that OSM has concluded that cash salaries generally should target
the 50th percentile as compared to persons in similar positions or roles at similar
entities. With respect to cash salaries, GM proposed 12 and Ally proposed 9
employees to receive a cash salary exceeding cash salary medians for a total of
$1.5 million exceeding median cash salary, and OSM agreed to 90% of those
requests.
OSM further appears to have eliminated the requirement that good cause be
shown before authorizing a cash salary over $500,000, thereby loosening a check
and balance available to limit excessive compensation.

Why this matters:
Without any criteria to ensure that it consistently applies its own “conclusion” to
target cash salaries at the 50th percentile, OSM approaches it on a case-by-case
determination as proposed by the company. SIGTARP found that OSM approved
90% of the company’s proposals (19 of 21 employees) for salaries to exceed cash
market medians. Some of these cash salaries exceed the 50th percentile
significantly. Treasury approved these cash salaries to exceed market medians by
amounts ranging from $6,800 to $187,000 for a total of $1.3 million without a
specific link to the establishment of good cause. Following is a detailed list of
each approved cash salary that exceeded market medians:

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

19

TABLE 1

OSM-APPROVED 2013 CASH SALARIES EXCEEDING MARKET MEDIANS
Amount of
Cash Salary OSM
Approved over
Market Median

Employee
ID
Number

Company

931656

Ally

$304,000

$491,000

$187,000

197253

Ally

$324,000

$500,000

176,000

104428

Ally

$398,000

$491,000

93,000

5046

GM

$390,000

$475,000

85,000

3774

GM

$402,500

$485,000

82,500

Market Median
Cash Salary

OSM-Approved
Cash Salary

2387

GM

$416,000

$495,000

79,000

682168

Ally

$525,000

$600,000

75,000

105336

Ally

$425,000

$500,000

75,000

1565

GM

$420,000

$495,000

75,000

1223

GM

$425,000

$495,000

70,000

6524

GM

$435,000

$495,000

60,000

9859

GM

$475,000

$525,000

50,000

380289

Ally

$342,000

$391,000

49,000

9074

GM

$378,000

$425,000

47,000

7537

GM

$566,000

$600,000

34,000

707713

Ally

$525,000

$550,000

25,000

725547

Ally

$485,000

$500,000

15,000

567303

Ally

$485,000

$500,000

15,000

0230

GM

$488,200

$495,000

6,800

Total

$1,299,300

Source: SIGTARP analysis of OSM’s 2013 determination memorandums and company proposals.

$500,000 Cash Salary: OSM’s prior “prescription,” or guideline, was that
generally salaries should not exceed $500,000 per year, except for good cause
shown – a guideline much stronger than what OSM currently follows. OSM’s
newly written procedures dated June 2013 state: “Base salary paid in cash should
in most cases not exceed $500,000.” OSM appears to have changed OSM’s
standard to one where a majority of cash salaries not exceed $500,000 and
removed the requirement that tied the increase to “for good cause shown.”
Stock Salary and Long-Term Restricted Stock: OSM previously determined the
amount of stock salary and long-term restricted stock by deducting the cash salary
from total compensation. Under the methodology set up by former Special
Master Feinberg, because the Recovery Act limited long-term restricted stock to

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

20

one-third of the employee’s total pay, OSM first calculated the amount of longterm restricted stock, and the remainder of the compensation package was stock
salary. As reported in SIGTARP’s 2012 report, to tie individual compensation to
long-term company success, OSM previously used long-term restricted stock
contingent on the employee achieving specific performance criteria. Long-term
restricted stock does not fully vest until the repayment of TARP financial
assistance – the very type of stock referenced in the President’s announcement.
SIGTARP previously reported that, for 2012 pay, OSM removed long-term
restricted stock based on the companies’ requests. When setting pay for 2013,
OSM included an extremely limited amount of long-term restricted stock
(effectively 5%), and when setting pay for 2014, OSM removed it altogether on
Ally’s request. Therefore, Treasury has approved that none of the Top 25
employees have pay that is tied to individual performance metrics related to the
long-term performance of the company, or that cannot be paid until taxpayers are
paid back. This removes an incentive for individuals to work toward repaying
TARP.

Why this matters:
By moving further and further away from the President’s announced pay reforms
and prior Treasury pay limits, OSM has moved closer and closer to the TARP
companies’ proposed pay, and in doing so has cut back an important incentive
that previously existed in pay limits and motivated Bank of America and
Citigroup to repay TARP. As with SIGTARP’s earlier reports, SIGTARP found
once again that these TARP companies receiving exceptional assistance failed to
take into account the exceptional situations that necessitated their financial
rescues. Their lack of appreciation is evident in Ally’s and GM’s proposed
excessive compensation for their employees in asking for pay raises, higher cash
salaries, and removal of long-term restricted stock, even though the companies
were not repaying taxpayers in full, resulting in billions in losses.
Staying in TARP well beyond all other large TARP recipients does not mean that
the return to taxpayers (OSM’s overriding principle) is getting better. At last
year’s Congressional hearing on SIGTARP’s report, former Special Master
Feinberg submitted for the record a letter in which he states that the market and
economy have changed since OSM was established and that the initial pay
prescriptions promulgated during his tenure may still be valid and credible, but
waivers and exceptions are to be more frequent and expected in light of changing
market conditions. Changes in the market should already be taken into account in
OSM-approved pay through the use of a market median (the 50th percentile).
Good Government requires objective standards and criteria set by the
Government, rather than a standard of how many excessive pay requests by
companies Treasury grants. Treasury must hold the line, or risk that exception

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

21

will give way to another exception subjecting Treasury to criticism of rewarding
top employees at a company unable to repay TARP at the expense of taxpayers
already suffering losses and at the expense of cutting back on needed financial
crisis reforms and a possible deterrent to future bailout requests.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

22

In 2013, Treasury Approved at Least $1 Million in
Pay for Every Top 25 Employee at GM and Ally,
and Approved Total Compensation that Was
More Than 28% Higher Than 2009 Pay
By 2013, Treasury significantly loosened restrictions on total compensation.
Last year, SIGTARP reported that, for 2012 pay, Treasury approved that all but
one employee be paid at least $1 million. For 2013, Treasury approved pay
packages worth at least $1 million for every Top 25 executive at GM and Ally.
That means that Treasury approved that every employee for whom it sets pay in
2013 be paid $1 million or more, significantly more than pay approved in 2009
and 2010.
While $1 million was the floor for Treasury-approved pay for top employees at
GM and Ally in 2013, Treasury approved many to be paid much more, with an
average pay of $3 million per employee.6 In 2009, Treasury approved
$101 million in total compensation for 43 GM and Ally Top 25 employees, for an
average of $2.4 million. Despite GM and Ally being the last two large companies
in TARP in 2013, Treasury increased pay by 28% over 2009 pay amounts. In
2013, Treasury approved $142 million in total compensation for 47 GM and Ally
Top 25 employees, for an average of $3 million. Treasury approved total
compensation of more than $5 million ($5.2 million to $9.5 million) for seven
employees at GM and Ally. Treasury approved total compensation packages
ranging from $3 million to $4.71 million for 9 additional GM and Ally
employees, and 31 pay packages ranging from $1 million to $2.9 million.
The pay Treasury awarded most of these employees in 2013 exceeded the market
median based on comparable positions and companies as determined by Treasury.
GM proposed 16 and Ally proposed 18 employees to receive total compensation
exceeding market medians by a total of $24.5 million. Treasury set pay for 88%
(30 of 34 employees) of these proposed employees, which exceeds market
medians. On an individual basis, these pay packages exceeded market medians
by amounts ranging from $17,700 to $2.7 million, for a total of $22.9 million. Of
the 30, Ally received 18 and GM received 12. For a detailed list of the pay
packages that exceeded market medians, see Appendix E.

6

The 2013 pay determinations are located in Appendices B and C.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

23

Why this matters:
Former Special Master Feinberg recounts in his book Who Gets What that
Congress wanted limitations on pay at TARP recipients because constituents
would be appalled at the idea of Congress using public funds to rescue
private companies headed by corporate chieftains earning millions of dollars.
SIGTARP has serious concerns that Treasury is rewarding top employees
with increased multimillion-dollar pay at companies that were not repaying
TARP, leaving Treasury to sell the shares into the market at a significant loss to
taxpayers. This leaves Treasury subject to criticism that it rewards top executives
of companies unable to repay their bailouts over the very taxpayers who lost
billions of dollars on those bailouts.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

24

Treasury Tripled the Number of GM and Ally
Employees Paid More than $500,000 in
Guaranteed Cash Salaries from 2009 to 2013
and Allowed 89% of the Employees To Be Paid
Cash Salaries of $450,000 or More
Former Special Master Feinberg recounts in his book one principle he followed
was “Guaranteed cash salary would be limited to $500,000 per year; any
additional amount would require special master approval. (In the end, fewer than
10 percent of the officials in the seven companies received such approval.)” OSM
loosened the restriction threefold in 2013, giving more than one-third (34%) of
employees under OSM’s pay-setting jurisdiction guaranteed cash salaries of more
than $500,000.
In 2009, Treasury held the line on guaranteed cash salaries over $500,000 to two
GM employees and three Ally employees using the Treasury guideline that cash
salaries should generally not exceed $500,000. By 2013, Treasury tripled the
number of GM and Ally employees paid more than $500,000 in cash from the 5
employees in 2009 to 16 employees.
SIGTARP in its two prior reports raised serious concerns about how Treasury was
approving more and more employees to be paid guaranteed cash salaries of more
than $500,000 without objective criteria, then allowing more and more employees
to fall just under that threshold. In 2013, OSM approved 84% (16 of 19)
company-proposed cash salaries exceeding $500,000. These salaries exceeded
$500,000 by an aggregate $3.6 million.7
Beyond this Treasury guideline, SIGTARP also found that OSM was not
following the spirit of the guideline to limit guaranteed cash salaries. OSM
allowed 89% (42 of 47) of all Top 25 employees at GM and Ally to be paid
guaranteed cash salaries of $450,000 or more, including 8 employees paid cash
salaries of exactly $500,000. A detailed list of each cash salary that exceeded
$500,000, ranging from $525,000 to $1,700,000, follows:

7

Of the 16 approved cash salaries that exceeded $500,000, Ally received 6 and GM received 10.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

25

TABLE 2

APPROVED CASH SALARY FOR 2013 OVER
$500,000
Company
Name

Employee
ID

Approved
Annual Base
Salary (cash)

GM

4859

$1,700,000

GM

94

950,000

GM

2986

750,000

GM

7459

750,000

GM

5555

750,000

GM

5697

750,000

GM

3348

650,000

Ally

265967

600,000

Ally

102645

600,000

Ally

339212

600,000

Ally

682168

600,000

GM

5021

600,000

GM

7537

600,000

Ally

546145

591,000

Ally

707713

550,000

GM

9859

525,000

Source: SIGTARP analysis of OSM’s 2013 determination
memorandums.

To ensure consistent and objective decision making, SIGTARP previously
recommended that Treasury substantiate decisions on whether company requests
demonstrate or fail to demonstrate “good cause” for approving cash salaries
exceeding $500,000 and for approving pay raises. SIGTARP also recommended
that Treasury develop policies, procedures, and criteria for approving pay in
excess of Treasury’s guidelines. OSM’s documentation of its justifications has
changed from last year, but continues to lack a showing of OSM’s independent
analysis as SIGTARP recommended. The justifications include the company’s
assertions and statements about where the employee’s compensation fell
compared to peers (as determined by data provided by the company). The
justifications do not show that OSM conducted independent analysis (as
recommended by SIGTARP) to verify some of the assertions companies made,
such as that employees were retention risks or crucial or analyzed beyond
discussing the assertions with the companies and/or other Treasury officials or
reading about the employees in newspaper articles.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

26

Why this matters:
OSM’s job is to look out for the interests of taxpayers, which it cannot do if it
continues to rely so heavily on the company’s justifications and requests without
independent analysis. OSM’s continued argument that there is no $500,000 cash
salary cap (as the President announced) misses the bigger risk of guaranteed high
cash salaries. As SIGTARP reported in its 2012 report, according to OSM,
OSM’s prior restriction that generally salaries should not exceed $500,000 per
year was based in part on the President’s statement. SIGTARP also reported that
former Special Master Feinberg said the decision to limit cash salaries to
$500,000 and to increase the proportion of compensation in the form of stock was
to strike a balance between reducing excessive risk and providing enough
compensation to keep employees’ “skin in the game.” The President’s announced
cap was a reform based on a material cause of the financial crisis. Weakening that
restriction on executive compensation could have the very dangerous effect of not
providing enough skin in the game and could tip the balance toward excessive
risk. Treasury’s Rule states that compensation structures should avoid incentives
to take unnecessary or excessive risks that could threaten the value of the TARP
recipient.

In 2013, Treasury Approved $3 Million in Pay Raises for Nine GM
Employees, Most of Whom Received Pay Raises in Consecutive
Annual Years
In 2013, Treasury approved a pay raise for each of the nine employees previously
in the Top 25 for whom GM had requested a pay raise. These raises were worth
approximately $3 million in 2013, as shown in the following table:

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

27

TABLE 3

GM EMPLOYEE PAY RAISES
Pay Raise
GM
Employee

2012
Total Pay

($)

(%)

2013
Total Pay

1

$4,850,000

$490,000

10

$5,340,000

2

4,250,000

460,000

11

4,710,000

3

5,400,000

450,000

8

5,850,000

4

4,300,000

410,000

10

4,710,000

5

5,000,000

325,000

7

5,325,000

6

2,925,000

300,000

10

3,225,000

7

1,332,500

267,500

20

1,600,000

8

2,150,000

250,000

12

2,400,000

9

2,100,000

75,000

4

2,175,000

$32,307,500

$3,027,500

Total

$35,335,000

Source: SIGTARP analysis of OSM’s 2012 and 2013 determination memorandums.

By several measures, the 2013 pay raises were excessive. First, Treasury raised
the employees’ pay by an average of 9.4% as a group (from $32.3 million in 2012
to $35.3 million in 2013). This exceeded the June 2013 Consumer Price Index
(“CPI”) of 1.8%, which is a measure of inflation in the prices of goods/services,
by 422%. On an individual basis, each of the nine raises also exceeded the CPI,
with the lowest raise 4% and the highest raise 20% more than the employees’
2012 compensation.
Average total compensation for the nine individuals before the pay raises was
$3.6 million, or approximately 7,000% higher than median household income in
2012, which was approximately $51,000, according to the U.S. Census Bureau.
The nine employees’ average total pay after the raises exceeded 2012 median
household income by approximately 7,600%.
Eight of the nine employees also received raises in 2012 (two consecutive years),
and five of these employees also received raises in 2011 (three consecutive years).
The following table shows these pay raises:

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

28

TABLE 4

GM EMPLOYEE PAY RAISES FOR 2013
GM Employee

2010
Total Pay

2011
Total Pay
Pay Raise

Employees Who Received Three Consecutive Annual Raises
5697*
$2,436,900
$3,500,000
$1,063,100
2986*
$2,778,850
$3,500,000
$721,150
4894*
$2,120,050
$2,550,000
$429,950
9635*
$1,800,000
$1,900,000
$100,000
3348*
$2,024,750
$2,050,000
$25,250
Employees Who Received Two Consecutive Annual Raises
5555
$4,200,000
**
n/a
5021
$5,300,000
**
n/a
7459
$4,200,000
**
n/a
Employee Who Received One Raise
3199
**
Total Raises

**
n/a
$2,339,450

2012
Total Pay
Pay Raise

2013
Total Pay
Pay Raise

Total
Pay Raises

$4,300,000
$800,000
$4,250,000
$750,000
$2,925,000
$375,000
$2,150,000
$250,000
$2,100,000
$50,000

$4,710,000
$410,000
$4,710,000
$460,000
$3,225,000
$300,000
$2,400,000
$250,000
$2,175,000
$75,000

$4,850,000
$650,000
$5,400,000
$100,000
$5,000,000
$800,000

$5,340,000
$490,000
$5,850,000
$450,000
$5,325,000
$325,000

$1,125,000

$1,332,500
n/a

$1,600,000
$267,500

$267,500

$3,775,000

$3,027,500

$9,141,950

$2,273,100
$1,931,150
$1,104,950
$600,000
$150,250

$1,140,000
$550,000

Source: SIGTARP analysis of OSM’s 2010 through 2013 determination memorandums.
*Denotes these GM employees were not in the Top 25 in 2009.
**Denotes the GM employee was not among the Top 25 in that year.

OSM has not established meaningful criteria for the approval of pay raises or
conducted independent analysis on pay raise requests for each employee as
SIGTARP previously recommended. When SIGTARP asked Acting Special
Master Geoghegan why she approved these pay raises, she told SIGTARP that
almost all of them were below median. And these are people who have enormous
responsibilities with regard to GM. And it is important, as you know, that GM
remain competitive so that it can retain and recruit employees and so that it can
maximize the return to taxpayers of the amounts owed under TARP. Geoghegan
also said that some employees had “expanded responsibilities.”
The reasons the Acting Special Master gave to justify pay raises are the very
things historically cited by the companies to justify proposals for excessive pay.
In 2012, SIGTARP reported that, given OSM’s overriding goal (of TARP
repayment), the seven companies had significant leverage over OSM by
proposing and negotiating for excessive pay packages, warning Special Master
Feinberg that if he did not provide competitive pay packages, top officials would
leave and go elsewhere, a claim that he said, at that time in October 2010, did not

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

29

come true as 85% of the people were still at the companies.8 Worse yet, unlike in
2009 and 2010, this is not the same situation because GM and Ally are not
repaying taxpayers in full. After these companies did not repay taxpayers in full
during these years, Treasury made the decision not to hold the stock but instead to
sell it into the market (and some back to GM) at substantial losses.
Given the lack of any meaningful criteria and lack of any documentation of
independent analysis for each employee, it is not transparent how OSM makes
decisions on pay raises separate from the company’s assertions. If OSM followed
its own process, pay for all employees should generally not exceed the market
median (as determined by the companies). Therefore, it is unclear if OSM now is
using pay raises to get the person to the market median.

Why this matters:
Without objective criteria, OSM is making decisions on pay raises based on the
company’s requests and threats about retention. The question should not be how
many of the company-requested pay raises should be allowed, but rather should
OSM be granting any pay raises for these companies that have been stuck in
TARP and, if so, what is the justification for doing so. The companies continue
requesting pay raises and Treasury keeps granting pay raises without regard for
the fact that these companies are not repaying TARP in full and taxpayers are
suffering losses. OSM cites the possibility of repayment to taxpayers for
justification of pay raises, but these companies are not repaying taxpayers in full.
Instead, Treasury is selling the stock into the market, and incurring billions of
dollars in losses. Moreover, Treasury is awarding pay raises in excess compared
to average households that continue to fund these very companies, raising some
employees’ pay year after year.

8

Former Special Master Feinberg wrote in his book that it was not clear that the departure of the 15% who left was tied
to compensation.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

30

Treasury Has Eliminated Long-Term Restricted
Stock Tying Pay to Individual Performance and
TARP Repayment, Which Was Typically
One-Third of Compensation Packages in 2009,
and Loosened Time Restrictions When
Employees Can Cash Out Company Stock
In his book, former Special Master Feinberg described Treasury’s principle of
performance-based compensation as “the heart and soul of the regulations.” He
wrote:
Only an executive’s base salary is guaranteed. The remainder of
the compensation package depends on individual and corporate
performance over at least three years. Short-term corporate
success should not trigger additional compensation; instead the
regulations focus on extended corporate growth. Corporate
officials and the companies they manage should be joined at the
hip when it comes to compensation.
OSM historically had used two types of stock in pay. The first is company stock,
which accrues at the same time as cash salary paid and which is not contingent on
an employee meeting individual performance metrics. Although the stock vests
each pay cycle, it is generally redeemable (can be cashed out) only in three equal
installments, beginning on the second anniversary of the grant date. The second
is long-term restricted stock that is contingent on the employee meeting individual
performance metrics and remaining at the company for three years. Long-term
restricted stock vests after the three years, but can only be redeemed by the
employee in 25% installments for each 25% of TARP obligations that are repaid.
OSM cut back on both of these important pay limits.
Treasury accelerated when top employees can cash out company stock as part of
salary:
The impact of OSM cutting long-term restricted stock to little to nothing is that
the pay that historically came in the form of long-term restricted stock would
come in the form of company stock, which is earned by employees in every
paycheck. Along with significantly increasing the amount of this company stock,
in 2013 OSM continued its practice of loosening restrictions on when employees
at GM and Ally could cash out this stock, giving yet again another benefit to those
companies’ employees and cutting back on a retention tool. SIGTARP reported
in 2012: “In testimony to the House Committee on Oversight and Government
Reform, the Special Master [Feinberg] said that he used stock salary to encourage
Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

31

senior executives to remain at the companies to maximize their benefit from the
profitability of the company.” In 2013, OSM made the decision that “because
GM has made significant repayments of the Company’s TARP obligations, each
redemption date of 2009, 2010, 2011, 2012, and 2013 stock salary may be
accelerated by one year.” Acting Special Master Geoghegan did something
similar for Ally.

Why this matters:
SIGTARP has serious concerns about OSM’s decision to accelerate when
employees can cash out company stock. First, not only did OSM continue its
practice to loosen this restriction on pay, which removes a retention tool, but
OSM made a decision that has the impact of giving the top employees the
opportunity to get cash quicker than they ever would have. In other words, OSM
just gave more guaranteed cash and removed more of employees’ “skin in the
game.” Second, SIGTARP questions OSM’s rationale to allow Ally and GM
employees to redeem stock salary early. OSM’s policies, procedures, guidelines,
and determination letters state stock salary can be redeemed early (after the first
anniversary as opposed to after the second anniversary of when the stock salary is
earned) if the company has begun to repay its TARP obligations. OSM, under
these vague guidelines, permitted Ally and GM employees to receive accelerated
stock salary, even though both companies’ TARP repayments, which largely
constituted Treasury’s sales of Ally and GM common stock, left taxpayers
shouldering billions of dollars in losses. Third, although there are some written
criteria for accelerating stock redemption based upon companies beginning to
repay TARP, some of the repayments were actually Treasury’s sale of stock in the
open market, which led to billions of dollars in losses. This seems to be a
perfect example of how OSM’s lack of policies, procedures, guidelines, and
criteria for decision making led to OSM being swayed by a company request that
serves to reward top employees and remove limits on pay.
Treasury removed long-term restricted stock from pay:
In addition, over the last three years, OSM got further and further away from
using long-term restricted stock as a limit on pay – previously the “heart and soul”
of Treasury’s limits on pay – eliminating it in 2014 as shown by the following
chart.9

9

The Acting Special Master did not approve long-term restricted stock for Ally employees in 2012 and 2014.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

32

FIGURE 2

AGGREGATE LTRS AS A PERCENTAGE OF AGGREGATE TOTAL COMPENSATION
FOR TOP 25 EMPLOYEES 2009-2014

Source: SIGTARP analysis of OSM’s determination memorandums.
*There were seven companies in 2009 receiving TARP exceptional assistance (AIG, Ally, Bank of America, Citigroup, GM,
Chrysler, Chrysler Financial; five companies in 2010 (AIG, Ally, Chrysler, Chrysler Financial, GM); four companies in 2011
(AIG, Ally, Chrysler, GM); three companies in 2012 (AlG, Ally, GM); two companies in 2013 (Ally and GM); and one
company in 2014 (Ally).

After raising serious concerns that Treasury removed long-term restricted stock
for every Ally employee in 2012, SIGTARP recommended that Treasury return to
using long-term restricted stock. Treasury’s response was paltry at best. In 2013,
Treasury approved five GM employees to not receive any long-term restricted
stock as a limit on pay (one more than in 2012), and Treasury effectively
approved a blanket 5% of the Ally employees’ pay in long-term restricted stock.10
10

In 2013, Treasury approved 10% of Ally employees’ total pay in the form of long-term restricted stock, but effectively
it was only half of that amount (5%) because it was pro rata as of July 1, 2013, meaning that prior to that date it was
delivered as stock salary.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

33

OSM’s blanket award of 5% is inconsistent with Treasury’s Rule that the portion
of performance-based compensation should be greater for positions in which
employees exercise higher levels of responsibility.11 OSM’s decision to allocate
effectively only 5% of Ally employees’ pay in the form of long-term restricted
stock is also inconsistent with OSM’s 2013 determination memorandum, which
states: “In most circumstances a large proportion of compensation should be held
or deferred for a period of at least three years.” A 5% allocation of long-term
restricted stock is not by any measure a “large portion.”
SIGTARP reported in 2013 that OSM had no documented criteria for taking away
long-term restricted stock, leading to a lack of accountability and transparency.
SIGTARP reported that Acting Special Master Geoghegan told SIGTARP at that
time that when OSM takes away long-term restricted stock, it is because the
individual may be very senior, may wish to retire, or otherwise will be leaving. In
September 2013, under this evaluation, the Acting Special Master told SIGTARP
that long-term restricted stock is not appropriate when the employee is nearing
retirement or when the company is in the process of restructuring and possibly
disposing of divisions in which case executives may have their jobs eliminated.
She also told SIGTARP that she eliminated long-term restricted stock for top Ally
employees in 2012 because a lot of these executives were at risk of losing their
jobs. This is a perfect example of a lack of written objective criteria by which
Treasury makes decisions, with OSM parroting the reason Ally gave OSM for its
request to eliminate this pay limit. It is also an example of a lack of independent
analysis by OSM to verify what the company told her. SIGTARP’s 2013 report
found that OSM removed this important pay limit for all Top 25 Ally employees
in 2012, even though only three of those employees worked at Residential
Capital, LLC (Ally’s financial mortgage subsidiary that filed for bankruptcy on
May 14, 2012). Moreover, most of Ally’s Top 25 employees in 2012 remained
among Ally’s Top 25 in 2013.
When asked why OSM approved so little long-term restricted stock for Ally
employees in 2013, the Acting Special Master told SIGTARP that she wanted to
keep in place Ally’s 2012 compensation structure (where none of the employees
had long-term restricted stock) while moving to a more standard pay structure. In
May 2013, Ally requested that OSM revise 2013 pay to eliminate all long-term
restricted stock and replace it with stock salary, citing the company’s ongoing
restructuring and difficulty with retention. OSM declined the request in
June 2013, only to eliminate all long-term restricted stock 10 months later, under
the 2014 determinations, at the request of Ally.

11

OSM’s determination memorandum states that Ally’s long-term restricted stock for 2013 is effective pro rata as of
July 1, 2013, and prior to that date will be delivered as stock salary.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

34

Why this matters:
In 2012, and again in 2014, Treasury completely removed long-term restricted
stock from every Ally employee’s pay package, removing a key incentive for
individual employees to work toward repaying taxpayers and important limits and
reforms on executive pay at TARP companies. Treasury’s removal of long-term
restricted stock contradicts two of the six principles outlined in Treasury’s Rule:
1) performance-based compensation – an appropriate portion of the compensation
should be based on performance metrics; and 2) appropriate allocation – the
compensation structure should appropriately allocate compensation between
components such as salary and short-term and long-term incentives. While OSM
has kept stock salary as part of pay packages, the value of that stock is based on
the company’s performance, not on individual performance metrics. Long-term
restricted stock is based on individual performance related to metrics tied to the
long-term success of the company and repaying taxpayers. In SIGTARP’s 2012
report, SIGTARP reported that OSM used long-term restricted stock to tie
individual compensation to long-term company success. Now that Treasury has
removed it from pay packages, no individual has to meet any performance metric
to receive their pay or wait until taxpayers are paid back, just as Ally wanted.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

35

Conclusion
Former Treasury Secretary Timothy F. Geithner said that executive compensation
played a material role in the financial crisis. As restraint in exchange for taxpayer
bailouts, Congress and the President announced that Troubled Asset Relief
Program (“TARP”) recipients would be required to abide by certain rules on
executive compensation, rules that the U.S. Department of the Treasury
(“Treasury”) was required to promulgate. In February 2009, the President
announced “reforms” that “top executives at firms receiving extraordinary help
from U.S. taxpayers will have their compensation capped at $500,000, a fraction
of the salaries that have been reported recently. And if these executives receive
any additional compensation, it will come in the form of stock that can’t be paid
up until taxpayers are paid back for their assistance.” After the President’s
announcement, Treasury promulgated a rule that listed six principles to keep pay
for TARP companies in the interest of taxpayers, principles that Treasury’s
former Special Master for TARP Executive Compensation (“Special Master”)
Kenneth R. Feinberg found inherently inconsistent. Therefore, he developed a
three-step methodology using what he called “prescriptions,” or guidelines, that
Treasury’s Office of the Special Master for TARP Executive Compensation
(“OSM”) used to set pay for the Top 25 employees at seven companies that had
received exceptional assistance under TARP.
In 2012, the Office of the Special Inspector General for the Troubled Asset Relief
Program (“SIGTARP”) reported that it found that the Special Master could not
effectively rein in excessive compensation because he was under the constraint
that his most important goal was to get the companies to repay TARP (one of
Treasury’s six principles). Given OSM’s overriding goal, the companies had
significant leverage by proposing and negotiating for excessive pay, warning that
if he did not provide competitive pay packages, top officials would leave and go
elsewhere, a claim that he said did not come true. The former Special Master
recounts in his book, Who Gets What: Fair Compensation after Tragedy and
Financial Upheaval (“Who Gets What”) that the primary goal in determining
payments for corporate officials was to maximize the likelihood that the
companies would repay TARP as quickly as possible because the taxpayers had to
be made whole. SIGTARP reported in 2012 that, although OSM limited cash
compensation and made some reductions in pay, OSM still approved total
compensation in the millions. In 2013, SIGTARP published a second report that
Acting Special Master Patricia Geoghegan rolled back OSM’s application of
guidelines aimed at curbing excessive pay, effectively relinquishing some of
OSM’s authority by relying to a great extent on the companies’ pay proposals or
justifications rather than robust policies, procedures, or criteria to ensure that
OSM’s guidelines are met.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

36

By April 2013, when Treasury’s OSM set 2013 pay, it found itself with an
incredibly narrow and limited job because there were only two companies left in
its jurisdiction. OSM touted as the ultimate metric of success for its pay decisions
the fact that the other five companies had exited TARP with taxpayers being
made whole (even though some of those companies did not repay but Treasury
sold their stock in the market). General Motors Corporation (“GM”) and its prior
auto financing arm General Motors Acceptance Corp. (“GMAC Inc.,” rebranded
as Ally Financial Inc. (“Ally”)) were not only the last two companies under
OSM’s jurisdiction, they were the last two large companies still in TARP after
four years. GM and former GMAC were having trouble repaying TARP in full,
taxpayers had suffered losses on both investments, and the Government estimated
final losses of $20 billion to $25 billion on the auto bailout (including losses on
GM, Ally, and the $2.9 billion loss taxpayers suffered from the TARP investment
in Chrysler Holding LLC (“Chrysler”).
Having not received TARP repayments in full from GM and Ally, Treasury made
the decision to sell the TARP stock in GM into the market and allowed GM to
buy back some of the stock, both at significant losses. When Treasury’s OSM set
2013 pay, taxpayers had already lost $8.2 billion on the TARP investment in GM.
Ally had made no repayments of the principal TARP investment. While Ally was
under a March 2013 failed stress test, taxpayers suffered a loss of $845 million
when Treasury sold Ally common stock in the market. SIGTARP evaluated
Treasury OSM’s determinations of 2013 pay for GM and Ally Top 25 employees.
While SIGTARP was conducting this evaluation, Treasury sold its remaining
TARP shares of GM into the market to arrive at a total loss to taxpayers of
$11.159 billion, and sold some of its Ally common stock into the market to arrive
at total losses of $1.8 billion. In April 2014, OSM’s job got even narrower as it
set 2014 pay for the Top 25 employees at only one company, Ally.
SIGTARP found that Treasury continued to award excessive pay by approving
some of the companies’ requests for pay raises and high guaranteed cash salaries,
and approving the companies’ requests to accelerate the time limit for corporate
officials to cash out company stock received as pay, and to eliminate pay tied to
individual performance metrics and the repayment of TARP (long-term restricted
stock). SIGTARP found that after making the pay determinations in April 2013,
Treasury made limited progress since SIGTARP’s last report but did not make the
meaningful reforms needed and previously recommended by SIGTARP. In
June 2013, OSM created for the first time a written policy and procedures.
However, these appear to be an attempt to document what OSM had done
historically without meaningful change as SIGTARP recommended. OSM’s
policy merely recites TARP legislation and the Treasury Rule, both in existence
prior to the establishment of OSM, leaving OSM as an office of Treasury that
operates without formal written policies developed by that office. SIGTARP
found that Treasury did not have robust policies, procedures, or criteria to ensure

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

37

that OSM’s guidelines are met. Two aspects of Treasury’s pay-setting process and
pay decisions serve as important lessons learned.
First, loosening limits on executive compensation for companies unable to repay
TARP subjects Treasury to criticism that it is rewarding top executives at
companies that are losing taxpayers’ money over the interests of the taxpayers
already shouldering billions of dollars in losses on those investments.
SIGTARP found the same thing that it reported in 2012 – that it continues to be
the case that, given OSM’s overriding goal of repayment to taxpayers, GM and
Ally had significant leverage by proposing and negotiating for excessive pay,
warning that if OSM did not provide competitive pay packages, top officials
would leave and go elsewhere. We note that this is a claim that Feinberg said did
not come true. GM and Ally continued to lack an appreciation for their situation
and were notably persistent in proposing more and more pay with fewer and
fewer restrictions for their top officials. Every year they sought exception after
exception to OSM’s guidelines. Bowing to the scare tactics of companies that
employees would leave if OSM did not approve their proposed pay, in 2013 OSM
continued to make pay decisions in a process that was ad hoc and inconsistent.
OSM made decisions based on which of the company’s proposals it would
approve, rather than using independent objective criteria designed to adhere to
OSM’s pay guidelines. The result has been that, every year, Treasury awarded
corporate officials at TARP companies more and more exceptions to Treasury’s
pay guidelines, which appears to have encouraged the companies to propose more
exceptions each year.
Treasury-approved exceptions to its own guideline restrictions on executive
compensation added up incrementally such that by OSM’s fifth year, 2013, OSM
had gotten further and further away from the President’s announcement and
OSM’s prior guidelines, even as taxpayer losses mount. SIGTARP found the
following:






Report Number 14-001

In 2009, Treasury’s guideline was to set pay to “generally not exceed the 50th
percentile” of what their peers made. Treasury appears now to have done
away with this guideline and by 2014 set most of Ally’s pay between the 50th
and 75th percentile.
Treasury-approved pay increased 28% for GM and Ally Top 25 employees
from 2009 to 2013.
Treasury awarded average pay of $3 million in 2013 to GM and Ally Top 25
employees.
In 2013, Treasury approved $3 million in aggregate pay raises for nine GM
employees, most of whom received pay raises in consecutive annual years.
Those raises were excessive. The pay raises ranged from 4% to 20%,
averaging 9.4%, which exceeded the June 2013 1.8% Consumer Price Index

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES











38

(a measure of inflation) by 422%. Treasury awarded these nine employees
pay that exceeded the 2012 median household income, according to the U.S.
Census Bureau, by 7,600%.
In 2013, Treasury approved 19 of 21 (90%) of the employees for whom GM
and Ally had requested cash salaries that would exceed the median.
By 2013, Treasury had loosened its guideline that guaranteed cash salary
would be limited to $500,000 per year, which was based on the President’s
statement that cash salaries not exceed that threshold. Treasury’s June 2013
guideline states: “Base salary paid in cash should in most cases not exceed
$500,000.”
In 2009, Treasury awarded fewer than 10% of the officials in the seven
companies to be paid cash salary in excess of $500,000, which tripled (34%)
by 2013.
In 2009, Treasury awarded 5 employees of GM and Ally cash salaries greater
than $500,000, which tripled to 16 employees by 2013.
In 2013, Treasury allowed almost all of the remaining Top 25 employees at
GM and Ally to be paid cash salaries of $450,000 or more.
Typically one-third of compensation in 2009 for Ally and GM, Treasury has
eliminated long-term restricted stock as part of pay for Ally in 2012 and 2014,
which is the type of stock referred to by the President, and the only stock tying
individual performance to TARP repayment.
Treasury loosened time restrictions by a full year for employees to cash out
company stock received as pay.

Just as SIGTARP found in its January 2013 report, SIGTARP found that Acting
Special Master Patricia Geoghegan continued to roll back OSM’s application of
guidelines aimed at curbing excessive pay, effectively relinquishing some of
OSM’s authority by relying to a great extent on the company’s pay proposals or
justifications rather than robust policies, procedures, or criteria to ensure that
OSM’s guidelines are met. OSM is granting many company requests without
independent analysis but instead based on the companies’ justification that the
employees had enormous responsibilities and these exceptions are needed to
retain the employees. While compensation committees at corporations may work
like this, it is not good Government practice to get further and further away from
important guidelines by approving exception after exception. Treasury has
allowed OSM to not implement six of seven SIGTARP recommendations that
were designed to keep OSM accountable to guidelines limiting excessive pay. A
lack of robust criteria, policies, and procedures to ensure that guidelines are met
leads to a lack of transparency, inconsistency, and ultimately a lack of
accountability to taxpayers.
The pendulum in OSM’s pay decisions has swung too far in the direction of
keeping companies competitive, without regard for the fact that the reason to keep
companies competitive is so that they can repay taxpayers in full, but GM and

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

39

Ally were not repaying taxpayers in full. Rather, taxpayers have suffered billions
of dollars in losses on those TARP investments. There should be no expectation
on the part of the companies or Treasury that pay should increase as companies
get farther in time from the crisis because that theory does not take into account
the fact that four years have not led these companies to repay taxpayers fully.
GM’s stock price never rose near to Treasury’s break-even price, but Treasury
continued to award pay raises, cash in excess of $500,000, and multimillion-dollar
pay.
Treasury’s pay decisions suggest that OSM’s overriding objective/principle of
“repayment of TARP” inures to the benefit of top executives at TARP companies
when Treasury sets pay. According to Feinberg’s book, Secretary Geithner’s
primary concern was “compensation should reflect the need for the company to
recruit and retain key employees so the company ultimately could repay every
cent borrowed. Pay back the taxpayers – with interest. Every company subject to
my jurisdiction, and much of the Treasury bureaucracy, referenced this variable in
urging the special master to be generous when it came to compensation.”
Feinberg was referring to his role in 2009 and 2010, but since then GM and Ally
have had much trouble repaying TARP fully, which is not reflected in OSM’s pay
decisions. If Treasury wants to use “repayment of TARP” as a factor to approve
“generous” pay, the lack of full repayment of TARP by GM and Ally should
likewise be reflected by Treasury to limit or maintain pay, but not to loosen
restrictions on pay more and more each year. Taxpayers are already subsidizing
losses on TARP investments in these companies and should not be forced by
Treasury to subsidize excessive executive compensation.
Second, by setting pay further and further away from the President’s and
Treasury’s announced limitations on executive compensation for TARP company
officials, Treasury is missing an opportunity for critical reforms to a material
cause of the financial crisis and a strong deterrent to future bailouts.
Even though six of the seven TARP exceptional assistance companies are no
longer in TARP, having strong restrictions on executive compensation at TARP
companies remains critical for the future. Should a future bailout occur, it is
important to have two playbooks. The first playbook the public needs would
describe how Treasury and other Government officials actually made decisions in
the TARP bailout, which requires transparency through written policies and
procedures and good documentation. SIGTARP’s reports bring as much
transparency to this decision making as is possible, but ultimately we are limited
due to the lack of robust policies and procedures, and the ad hoc nature by which
OSM makes decisions. The second playbook the public needs would describe
how the Government could have improved, as determined by oversight agencies
such as SIGTARP, so that future Government officials faced with the possibility
of a bailout with limited time, have a go-to guide for best practices in decision

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

40

making. In the height of the crisis, when the Government was making much of its
decisions, a lack of some documentation or some objective criteria was to be
expected for first-of-their-kind decisions. It was one thing in 2009 for OSM to
operate without written policies, procedures, and criteria when OSM officials
were just trying to get their hands around a wealth of information on pay at these
companies. However, there is no excuse now for OSM to not have objective
criteria to keep OSM accountable to strong limits on pay at TARP companies.
Moreover, OSM loosening restrictions on pay could have the effect of loosening
incentives for individual corporate executives to work toward their company
repaying TARP. Bank of America Corporation and Citigroup Inc. told SIGTARP
that the limits on executive compensation motivated them to get out of TARP’s
exceptional assistance programs as soon as they could in 2009. Ally is still in
TARP today, and the Government should be keeping every incentive it has to get
Ally to repay TARP. Now no individual at Ally has to meet any performance
metric to receive their pay or wait until taxpayers are paid back (as the President
announced). This is just what Ally wanted. Removing ties between individual
pay and the long-term success of the company and the repayment of TARP by the
company could have the dangerous effect that Ally executives with no stake in
TARP repayment would not work toward repayment but instead watch the
Government sell Ally common stock into the market at further losses to
taxpayers.
In addition, by loosening restrictions on pay, OSM could be sending the message
that the much-needed reforms coming out of the financial crisis are no longer
necessary or required in exchange for Federal dollars. In 2009, the President
announced restraints on pay at TARP companies as reforms, stating: “so that
when firms seek new federal dollars, we won’t find them up to the same old
tricks.” By getting further and further away from the President’s announced
reforms and Treasury’s own guidelines, our nation may find the firms up to their
same old tricks.
OSM’s position that there is nothing requiring it to follow the President’s
announcement misses the point because the President was announcing reforms
designed to combat one of the material causes of the financial crisis. OSM’s own
guidelines were created as reforms because leading up to the crisis, corporate
officials at TARP companies were paid with high guaranteed cash salaries with
“no skin in the game.” OSM’s guideline under former Special Master Feinberg
that cash salaries generally not exceed $500,000 was about giving an employee
“skin in the game.” Feinberg also used a significant amount of pay in the form of
long-term restricted stock to “join at the hip” the individual and corporation,
through individual performance focused on extended corporate growth over at
least three years, not just short-term corporate success.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

41

Weakening restrictions on executive compensation could have the very dangerous
effect of not providing employees enough skin in the game, and could tip the
balance toward excessive risk. In 2013, OSM tripled the number of corporate
officials paid guaranteed cash salaries over $500,000 in 2009, and put almost
everyone else just under that cash threshold. OSM accelerated by one year the
prior time restriction for corporate officials to cash out corporate stock received as
pay from 2009 to 2014, effectively guaranteeing more cash pay and reducing an
employee’s skin in the game even further. OSM gave a tiny (effectively 5%)
portion of pay to Ally employees in long-term restricted stock in 2013 tied to
long-term corporate success and TARP repayment, only to remove it entirely in
2014. Eroding reforms coming out of the financial crisis could have the
dangerous effect of allowing companies to end up in the same place that required
reforms in the first place.
Finally, should this nation face the possibility of a future bailout, strong
limitations on executive compensation on this still-existing TARP bailout could
have a deterrent effect on companies asking the Government for Federal dollars.
No one employee, no matter how valuable to his or her company, is important
enough to risk weakening a deterrent to future bailouts.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

42

Recommendations
According to the Government Accountability Office’s Standards for Internal
Control in the Federal Government, commonly referred to as the green book,
internal control is an integral component of an entity’s management that provides
reasonable assurance that the objectives of an entity are being achieved.
Moreover, the green book states internal control, which comprises among other
things, policies and procedures, helps management achieve desired results
through effective stewardship of public resources.
As discussed throughout this report, OSM’s lack of robust policies, procedures,
and guidelines have contributed to why OSM continues to approve excessive
compensation and why OSM continues to make exceptions to its own guidelines.
More robust policies and procedures would help ensure OSM’s determinations are
not excessive and will help OSM to reject company requests for excessive
compensation. Specifically, SIGTARP recommends:
1. The Secretary of the Treasury should require OSM to maintain documentation
of the substance of all OSM communications with TARP companies.
2. The Secretary of the Treasury should require all Treasury employees to
maintain documentation of all communications with TARP companies
regarding compensation.
3. The Secretary of the Treasury should require OSM to maintain documentation
of OSM’s communications with Treasury officials regarding compensation at
TARP companies.
4. The Secretary of the Treasury should require OSM to use long-term restricted
stock as part of each TARP company’s employee’s compensation package to
ensure compensation is tied to both the employee’s and the company’s
performance, and the full repayment of TARP funds.
5. The Secretary of the Treasury should direct OSM to conduct an analysis,
independent of company proposals and assertions, for an employee of a TARP
exceptional assistance company to be paid a cash salary exceeding $500,000.
6. The Secretary of the Treasury should direct OSM to document its independent
analyses regarding the decision that a TARP exceptional assistance company
employee be paid a cash salary exceeding $500,000.
7. The Secretary of the Treasury should direct OSM to conduct an analysis,
independent of company proposals and assertions, for an employee of a TARP

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

43

exceptional assistance company to receive an increase in annual
compensation.
8. The Secretary of the Treasury should direct OSM to document its independent
analyses regarding the decision that a TARP exceptional assistance company
employee will receive an increase in annual compensation.
9. The Secretary of the Treasury should direct OSM to conduct an analysis,
independent of company proposals and assertions, for an employee of a TARP
exceptional assistance company to be paid a cash salary that exceeds the
market median cash salary for similar positions in similar companies.
10. The Secretary of the Treasury should direct OSM to document its independent
analyses regarding the decision that a TARP exceptional assistance company
employee be paid a cash salary exceeding market medians.
11. The Secretary of the Treasury should direct OSM to include in its written
procedures whether it will target, for each Top 25 employee of a TARP
exceptional assistance company, median total compensation for similar
positions in similar companies.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

44

Management Comments and SIGTARP’s
Response
Treasury provided an official written response to a draft of this report in a letter
dated September 21, 2014, which is produced in full in Appendix I. Overall,
Treasury disagrees with the draft report, as it has with our two previous reports.
While Treasury’s letter states our report contains inaccuracies and omissions, we
believe OSM disagrees with our conclusions. Treasury has not clearly agreed to
implement any of the report’s recommendations, which were intended to improve
the program. SIGTARP considered and addressed OSM’s comments in the report
as necessary and appropriate.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

45

Appendix A – Objective, Scope, and Methodology
SIGTARP performed this evaluation under the authority of Public Law 110-343, as amended, which
also incorporates the duties and responsibilities of inspectors general under the Inspector General
Act of 1978, as amended. SIGTARP evaluated the Special Master’s decisions on executive
compensation at Ally and GM, the two companies remaining in TARP that had received exceptional
financial assistance. Our specific objective was to evaluate the 2013 pay packages proposed by Ally
and GM and the decisions made by Treasury for compensation of the Top 25 at Ally and GM.
The scope of the evaluation covered Ally’s and GM’s 2013 Top 25 compensation proposals and
OSM-approved pay packages. The evaluation began in April 2013 and ended in September 2014
and was performed in Washington, D.C. To evaluate OSM’s decisions on the company-proposed
pay packages of the Top 25 employees, SIGTARP interviewed OSM officials and reviewed the
company proposals, OSM’s 2013 determinations and supporting documentation for 47 Ally and GM
Top 25 employees. During the evaluation, OSM issued in April 2014 its 2014 pay determinations for
the Top 25 employees at Ally. Although SIGTARP did not open the evaluation to cover all
decisions made by OSM, where applicable it has referred to the public results.
SIGTARP evaluated OSM’s decision making on pay and whether OSM implemented changes in
response to SIGTARP’s earlier reports and recommendations. SIGTARP reviewed the Emergency
Economic Stabilization Act of 2008, the American Recovery and Reinvestment Act of 2009, TARP
Standards for Compensation and Corporate Governance; Interim Final Rule, Congressional
testimony, OSM’s June 2013 written policy, OSM’s June 2013 written procedures as well as OSM
pay determination letters. SIGTARP also reviewed former Special Master Kenneth R. Feinberg’s
discussion of his work at OSM in his book, Who Gets What.
SIGTARP conducted this evaluation in accordance with the “Quality Standards for Inspection and
Evaluation” established by the Council of the Inspectors General on Integrity and Efficiency. Those
standards require that SIGTARP plan and perform the evaluation to obtain evidence sufficient to
provide a reasonable basis for findings and conclusions based on the evaluation objectives.
SIGTARP believes that the evidence obtained provides a reasonable basis for the findings and
conclusions based on the evaluation objectives.

Limitations on Data
SIGTARP relied upon Treasury to identify and provide email communication and documents related
to the executive compensation determination process. It is possible that the documentation provided
by Treasury did not reflect a comprehensive response to SIGTARP’s documentation requests,
potentially limiting SIGTARP’s review.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

46

Use of Computer-Processed Data
SIGTARP did not use computer-processed data during this evaluation. SIGTARP obtained data
from the company proposals received from Treasury and from determination memorandums
available to the public on Treasury’s website.

Internal Controls
To assess internal controls over OSM’s determination process, SIGTARP interviewed OSM staff
and requested OSM’s policies and procedures to determine the extent to which policies and
procedures existed, and whether internal controls were reasonable and effective.

Prior Coverage
On January 28, 2013, SIGTARP issued evaluation report 13-001, “Treasury Continues Approving
Excessive Pay for Top Executives at Bailed-Out Companies.” This report assesses OSM’s paysetting process for 2012 for the Top 25 employees of the remaining TARP exceptional assistance
companies – AIG, GM, and Ally – in light of the findings and recommendations in SIGTARP’s
previous report, issued January 23, 2012.
On January 23, 2012, SIGTARP issued evaluation report 12-001, “The Special Master’s
Determinations for Executive Compensation of Companies Receiving Exceptional Assistance Under
TARP.” This report addresses the process OSM designed to set pay packages and OSM’s decisions
on compensation for the Top 25 employees at the companies that received exceptional assistance
under TARP. Under this evaluation, SIGTARP assessed the criteria used by OSM to evaluate and
make determinations of each company’s executive compensation and whether OSM consistently
applied criteria for the determinations made in 2009, 2010, and 2011.
On October 14, 2009, SIGTARP issued audit report 10-002, “Extent of Federal Agencies’ Oversight
of AIG Compensation Varied, and Important Challenges Remain.” This report addresses the extent
of knowledge and oversight by Federal Reserve and Treasury officials over AIG compensation
programs and, specifically, payments to retain employees in the AIG Financial Products (“AIGFP”)
unit. The report also addresses the extent to which executive compensation restrictions or
preexisting contractual obligations governed AIGFP retention payments, the outstanding AIG
compensation issues requiring resolution, and Government actions to address them.
On August 19, 2009, SIGTARP issued audit report 09-003, “Despite Evolving Rules On Executive
Compensation, SIGTARP Survey Provides Insights on Compliance.” This report addresses the
efforts of TARP recipients to comply with executive compensation restrictions and plans to comply
with subsequently enacted changes in requirements.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

47

Appendix B – Treasury 2013 Pay Determinations for Ally
EXHIBIT I
COVERED EMPLOYEES
2013 Compensation
Company Name: Ally Financial Inc.

Employee ID

Cash Salary

Stock Salary
(Performance
based: The
stock vests at
grant and is
redeemable
in
three equal,
annual
$8,550,000
installments
$1,480,000
beginning on
the first $4,068,621
anniversary
$1,975,900
of grant.)

Long-Term
Restricted Stock
(Performance
based: Awarded
based on
achievement of
objective
performance
goals. Generally
$950,000
vests after three
years of $220,000
service.
Transferability
$518,736
dependent on
$274,100
TARP repayment.)

Total Direct
Compensat
ion (Cash
salary +
stock salary
+ long-term
restricted
$9,500,000
stock.)

280677
$0
101512
$500,000
$2,200,000
102645
$600,000
$5,187,357
104428
$491,000
$2,741,000
105336
$500,000
$1,525,000
$225,000
$2,250,000
141296
$491,000
$1,673,930
$240,548
$2,405,478
159613
$421,008
$1,157,741
$175,416
$1,754,165
197253
$500,000
$2,778,650
$364,294
$3,642,944
265967
$600,000
$3,358,103
$439,789
$4,397,892
339212
$600,000
$400,000
$0
$1,000,000
353403
$416,000
$1,398,400
$201,600
$2,016,000
380289
$391,000
$1,310,900
$189,100
$1,891,000
391076
$500,000
$1,840,000
$260,000
$2,600,000
398005
$450,000
$1,233,000
$187,000
$1,870,000
513416
$491,000
$1,597,900
$232,100
$2,321,000
542135
$250,000
$2,270,000
$280,000
$2,800,000
546145
$591,000
$3,000,900
$399,100
$3,991,000
567303
$500,000
$2,020,000
$280,000
$2,800,000
673894
$490,988
$1,120,912
$179,100
$1,791,000
682168
$600,000
$4,462,345
$562,483
$5,624,828
707713
$550,000
$2,150,000
$300,000
$3,000,000
725547
$500,000
$2,020,000
$280,000
$2,800,000
931656
$491,000
$1,768,786
$251,087
$2,510,873
Comparison of 2013 compensation to prior year compensation for the employees listed above
• Overall: Overall cash decreased $5.0 million, or 31.3%, and total direct compensation decreased $18.8 million, or 20.8%.
• The 16 employees remaining in the Top 25 from 2012: Cash salaries remained the same and total direct compensation decreased
$6.5 million, or 10.2%, from 2012. (This comparison is to target total direct compensation for 2012.)
• The seven employees new to the Top 25 in 2013: Cash compensation decreased $5.0 million, or 62.9%, and total direct
compensation decreased $12.3 million, or 46.1%, from 2012.
Note 1: The total number of Covered Employees may be fewer than 25 because of separations from service since January 1, 2013.
Note 2: The amounts set forth in Exhibit I were to be effective January 1, 2013, except that the amounts in the “Long-Term Restricted
Stock” column were to be effective pro rata as of July 1, 2013, and prior to that date were to be delivered as stock salary.
Redemption of stock salary awarded to the CEO will be as described above. Redemption of stock salary awarded to other Covered
Employees will be in three installments as described in the Determination Memorandum. In addition, prior to July 1, 2013, the
amount indicated in the stock salary column for employee 339212 was to be paid at an annualized rate of $1.4 million.
Source: Treasury. 2013 approved pay determination for the Top 25 executives at Ally as of April 26, 2013.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

48

Appendix C – Treasury 2013 Pay Determinations for GM
EXHIBIT I
COVERED EMPLOYEES
2013 Compensation
Company Name: General Motors Company

4859

$1,700,000

0094

$950,000

0230

$495,000

1223

$495,000

Stock Salary
(Performance
based: The
stock vests at
grant and is
redeemable
in
three equal,
annual
$7,300,000
installments
$1,187,500
beginning on
the first
$840,000
anniversary
$626,000
of grant.)

1565

$495,000

$660,000

$525,000

$1,680,000

2346

$485,000

$845,000

$500,000

$1,830,000

2387

$495,000

$835,000

$600,000

$1,930,000

2986

$750,000

$3,960,000

$0

$4,710,000

3178

$460,000

$618,000

$450,000

$1,528,000

3199

$500,000

$600,000

$500,000

$1,600,000

3348

$650,000

$1,525,000

$0

$2,175,000

3774

$485,000

$1,015,000

$200,000

$1,700,000

4894

$495,000

$2,730,000

$0

$3,225,000

5021

$600,000

$4,250,000

$1,000,000

$5,850,000

5046

$475,000

$480,000

$320,000

$1,275,000

5555

$750,000

$2,840,000

$1,750,000

$5,340,000

5697

$750,000

$2,410,000

$1,550,000

$4,710,000

6386

$490,000

$1,137,000

$0

$1,627,000

6524

$495,000

$700,000

$555,000

$1,750,000

7459

$750,000

$2,825,000

$1,750,000

$5,325,000

7537

$600,000

$1,400,000

$1,000,000

$3,000,000

9074

$425,000

$312,500

$325,000

$1,062,500

9635

$500,000

$1,150,000

$750,000

$2,400,000

9859

$525,000

$545,000

$475,000

$1,545,000

Employee ID

Cash
Salary

Long-Term
Restricted Stock
(Performance
based: Awarded
based on
achievement of
objective
performance goals.
Generally vests
$0
after three years of
$1,000,000
service.
Transferability
$665,000
dependent on TARP
$515,000
repayment.)

Total Direct
Compensation
(Cash salary + stock
salary + long-term
restricted stock.)

$9,000,000
$3,137,500
$2,000,000
$1,636,000

Comparison of 2013 compensation to prior year compensation for the employees listed above
• Overall: Overall cash decreased $6.6 million, or 30.7%, and total direct compensation decreased $3.0 million, or 4.1%, from 2012.
• The 14 employees remaining in the Top 25 from 2012: Cash salaries remained the same and total direct compensation increased
$3.0 million, or 6.1%, from 2012. (This comparison is to target total direct compensation for 2012; the amount of long-term
restricted stock actually awarded may have been lower than the target amount.)
• The 10 employees new to the Top 25 in 2013: Cash compensation decreased $6.6 million, or 57.0%, and total direct
compensation decreased $6.0 million, or 26.1%, from 2012.
Note 1: The total number of Covered Employees may be fewer than 25 because of separations from service since April 1, 2013.
Source: Treasury. 2013 approved pay determination for the Top 25 executives at GM as of April 26, 2013.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

49

Appendix D – Treasury 2014 Pay Determinations for Ally
EXHIBIT I
COVERED EMPLOYEES
2014 Compensation
Company Name: Ally Financial Inc.

Employee
ID

Cash
Sala
ry

Stock Salary
(Performance
based: The
stock vests at
grant and is
redeemable in
three equal,
annual
installments
beginning on the
$9,500,000
first anniversary
$1,700,000
of grant.)

Long-Term Restricted
Stock (Performance
based: Awarded based
on achievement of
objective performance
goals. Generally vests
after three years of
service. Transferability
dependent on TARP
repayment.)

Total Direct
Compensation
(Cash salary
+ stock
salary +
long-term
restricted
stock.)

280677
$0
$0
$9,500,000
101512
$500,000
$0
$2,200,000
102645
$600,000
$0
$5,187,357
$4,587,357
105336
$500,000
$0
$2,250,000
$1,750,000
129881
$400,000
$0
$1,441,000
$1,041,000
141296
$491,000
$0
$2,405,478
$1,914,478
159613
$491,000
$0
$2,341,000
$1,850,000
178067
$450,000
$0
$1,366,000
$916,000
197253
$500,000
$0
$3,642,944
$3,142,944
265967
$600,000
$0
$4,397,892
$3,797,892
305789
$491,000
$0
$1,791,000
$1,300,000
353403
$416,000
$0
$2,016,000
$1,600,000
354392
$500,000
$0
$2,174,943
$1,674,943
380289
$391,000
$0
$1,891,000
$1,500,000
391076
$500,000
$0
$2,600,000
$2,100,000
398005
$450,000
$0
$1,870,000
$1,420,000
491397
$391,000
$0
$1,441,000
$1,050,000
513416
$491,000
$0
$2,321,000
$1,830,000
546145
$591,000
$0
$3,991,000
$3,400,000
567303
$500,000
$0
$2,800,000
$2,300,000
673894
$490,988
$0
$1,791,000
$1,300,012
725547
$500,000
$0
$2,800,000
$2,300,000
921597
$500,000
$0
$2,149,872
$1,649,872
931656
$491,000
$0
$2,510,873
$2,019,873
.Comparison of 2014 compensation to prior year compensation for the employees listed above
• Overall: Overall cash decreased $3.8 million or 25.2% and total direct compensation decreased $3.3
million or 4.7%.
• The 18 executives remaining in the top 25 from 2013: Cash salaries remained the same and total direct
compensation increased $150,000 or 0.27% from 2013. (This comparison is to target total direct compensation
for 2013.)
• The six executives new to the top 25 in 2013: Cash compensation decreased $3.8 million or 58.1% and
total direct compensation decreased $3.4 million or 24.8% from 2013.
Note 1: The total number of Covered Employees may be less than 25 because of separations from service since January 1, 2014.
Note 2: Redemption of stock salary awarded to the CEO will be as described above. Redemption of stock salary awarded to
other Covered Employees will be in three installments as described in the Determination Memorandum.
Source: Treasury. 2014 approved pay determination for the Top 25 executives at Ally as of April 2, 2014

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

50

Appendix E – OSM-Approved Total Pay over Market
Medians in 2013
OSM-APPROVED TOTAL PAY OVER MARKET MEDIANS IN 2013
Employee
ID
Number

Company
Name

Market Median
Total Pay
in 2013

OSM-Approved
Total Pay
in 2013

Amount of OSMApproved Total Pay
over the Median

682168

Ally

$2,960,000

$5,624,828

$2,664,828

102645

Ally

$3,455,000

$5,187,357

1,732,357

265967

Ally

$2,672,000

$4,397,892

1,725,892

280677

Ally

$8,152,000

$9,500,000

1,348,000

391076

Ally

$1,381,000

$2,600,000

1,219,000

542135

Ally

$1,616,000

$2,800,000

1,184,000

931656

Ally

$1,338,000

$2,510,873

1,172,873

105336

Ally

$1,096,000

$2,250,000

1,154,000

197253

Ally

$2,505,000

$3,642,944

1,137,944

104428

Ally

$1,616,000

$2,741,000

1,125,000

141296

Ally

$1,381,000

$2,405,478

1,024,478

7537

GM

$2,094,000

$3,000,000

906,000

101512

Ally

$1,361,000

$2,200,000

839,000

2387

GM

$1,189,000

$1,930,000

741,000

707713

Ally

$2,271,000

$3,000,000

729,000

1565

GM

$1,094,000

$1,680,000

586,000

380289

Ally

$1,355,000

$1,891,000

536,000

513416

Ally

$1,810,000

$2,321,000

511,000

6524

GM

$1,353,000

$1,750,000

397,000

3774

GM

$1,335,400

$1,700,000

364,600

3178

GM

$1,195,000

$1,528,000

333,000

0230

GM

$1,675,000

$2,000,000

325,000

1223

GM

$1,327,600

$1,636,000

308,400

546145

Ally

$3,765,000

$3,991,000

226,000

5046

GM

$1,054,100

$1,275,000

220,900

353403

Ally

$1,833,000

$2,016,000

183,000

9074

GM

$932,000

$1,062,500

130,500

398005

Ally

$1,833,000

$1,870,000

37,000

4894

GM

$3,199,000

$3,225,000

26,000

0094

GM

$3,119,800

$3,137,500

17,700

Total

$22,905,472

Source: SIGTARP analysis of OSM’s 2013 determination memorandums and company proposals.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

51

Appendix F – Status on Each of SIGTARP’s Seven
Recommendations
SIGTARP’s Recommendation

Status on Each of SIGTARP’s
Recommendations

1. To ensure that the office of the Special Master for
TARP Executive Compensation consistently grants
exceptions to the $500,000 cash salary cap, the
Office of the Special Master should substantiate
each exception requested and whether the requests
demonstrate or fail to demonstrate “good cause.”

Not Implemented. While Treasury’s
documentation of granting these cash salaries
has improved in that it includes some
additional information beyond the company’s
assertions, that information is primarily
market data that the company provides. The
recommendation was not to document better,
but instead to “substantiate,” which requires
some criteria for granting exceptions as well
as independent analysis beyond the company’s
assertions. Treasury’s policy and procedures
do not contain any criteria for approving cash
salaries exceeding $500,000 or any discussion
of any analysis by Treasury.
Implemented. In 2012, Treasury began
retaining records of the market data provided
by the company and a description of how it
validates the data.

2. The Office of the Special Master should better
document its use of market data in its calculations.
At a minimum, the Office of the Special Master
should prospectively document which companies
and employees are used as comparisons in its
analysis of the 50th percentile of the market, and it
should also maintain records and data so that the
relationship between its determinations and
benchmarks is clearly understood.
3. The Office of the Special Master should develop
more robust policies, procedures, or guidelines to
help ensure that its pay determination process and
its decisions are evenhanded. These measures will
improve transparency and help the Office of the
Special Master consistently apply the Interim Final
Rule principles of “appropriate allocation,”
“performance-based compensation,” and
“comparable structures and payments.”

4. Each year, Treasury should reevaluate total
compensation for those employees at TARP
exceptional assistance companies remaining in the
Top 25 from the prior year, including determining
whether to reduce total compensation.

Report Number 14-001

Not Implemented. Although Treasury created
a written policy and procedures in June 2013,
OSM’s policy only contains Treasury’s Rule
and language from the statute, all of which
existed prior to OSM’s creation. Therefore,
OSM has not created its own formal policies.
OSM’s written procedures are merely a
documentation of some of OSM’s existing
practices and guidelines, but not others as
contained in the pay determination letters, and
were not a new development of robust
policies, procedures, or guidelines. They do
not establish meaningful criteria Treasury can
follow for approving cash salaries exceeding
$500,000, pay exceeding market medians, pay
raises, or the use of long-term restricted stock.
Not Implemented. Treasury’s new procedures
state that OSM may reduce pay; however,
OSM did not address any guidelines or criteria
that it would consider in doing so.

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

5. To ensure that Treasury effectively applies
guidelines aimed at curbing excessive pay and
reducing risk taking, Treasury should develop
policies, procedures, and criteria for approving pay
in excess of Treasury guidelines.
6. Treasury should independently analyze whether
good cause exists to award a Top 25 employee a
pay raise or a cash salary over $500,000. To ensure
that the Office of the Special Master has sufficient
time to conduct this analysis, Treasury should allow
OSM to work on setting Top 25 pay prior to OSM’s
receiving the company pay proposals, which start
the 60-day timeline.

7. To be consistent with Treasury’s Interim Final Rule
that the portion of performance-based
compensation compared to total compensation
should be greater for positions that exercise higher
levels of responsibility, Treasury should return to
using long-term restricted stock for employees,
particularly senior employees such as CEOs.

Report Number 14-001

52

Not Implemented. Treasury has not
established clear policies, procedures, and
criteria for approving pay in excess of
Treasury’s guidelines such as the 50th
percentile, cash salaries greater than $500,000,
or use of long-term restricted stock.
Not Implemented. Treasury has not
established criteria for awarding an employee
a pay raise or a cash salary exceeding
$500,000. Such criteria are important for
independently analyzing the basis for
awarding pay raises or cash salaries greater
than $500,000 and ensuring consistency in
decision making. Treasury’s documentation
of its justification does not evidence
independent analysis, but instead sets forth the
company’s assertions and market data
supplied by the company.
Not Implemented. In 2013, Treasury allowed
some GM employees not to have long-term
restricted stock and effectively approved only
5% of all Ally employees’ pay in long-term
restricted stock and failed to consider
positions and levels of authority on an
individual basis, as called for by Treasury’s
Rule. In 2014, Treasury eliminated long-term
restricted stock for Ally employees.

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

53

Appendix G – Acronyms and Abbreviations
Acronym or
Abbreviation

Definition

AIG
AIGFP
Ally

American International Group, Inc.
AIG Financial Products
Ally Financial Inc. (formerly General Motors Acceptance Corporation,
Inc.)
Chrysler Holding LLC
Chrysler Financial Services Americas LLC
Consumer Price Index
General Motors Corporation (name changed from Corporation to
Company after bankruptcy in 2009)
TARP Standards for Compensation and Corporate Governance;
Interim Final Rule (also “Treasury’s Rule”)
Office of the Special Master for TARP Executive Compensation
American Recovery and Reinvestment Act of 2009
Office of the Special Inspector General for the Troubled Asset Relief
Program
Special Master for TARP Executive Compensation
Troubled Asset Relief Program
the five senior executive officers and the next 20 most highly
compensated employees
U.S. Department of the Treasury

Chrysler
Chrysler Financial
CPI
GM
IFR
OSM
the Recovery Act
SIGTARP
Special Master
TARP
Top 25
Treasury

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

54

Appendix H – Evaluation Team Members
This evaluation was conducted and the report was prepared under the direction of Bruce Gimbel,
Deputy Special Inspector General for Audit and Evaluation, Office of the Special Inspector General
for the Troubled Asset Relief Program.
Staff members who conducted the evaluation and contributed to the report include Jenniffer Wilson,
Craig Meklir, Vonda Batts, Brandon Crowder, Michelle Mang, Janice Turner, and Cynthia Broome.

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

55

Appendix I – Management Comments

Report Number 14-001

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

Report Number 14-001

56

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

Report Number 14-001

57

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

Report Number 14-001

58

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

Report Number 14-001

59

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

Report Number 14-001

60

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

Report Number 14-001

61

September 24, 2014

TREASURY SIGNIFICANTLY LOOSENED EXECUTIVE PAY LIMITS RESULTING IN EXCESSIVE PAY FOR TOP 25
EMPLOYEES AT GM AND ALLY (GMAC) WHEN THE COMPANIES WERE NOT REPAYING TARP IN FULL AND TAXPAYERS
WERE SUFFERING BILLIONS OF DOLLARS IN LOSSES

Report Number 14-001

62

September 24, 2014

SIGTARP Hotline
If you are aware of fraud, waste, abuse, mismanagement, or misrepresentations associated with the Troubled
Asset Relief Program, please contact the SIGTARP Hotline.
By Online Form: www.SIGTARP.gov
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By Phone: Call toll free: (877) SIG-2009

By Fax: (202) 622-4559
By Mail:

Hotline: Office of the Special Inspector General
for the Troubled Asset Relief Program
1801 L Street., NW, 3rd Floor
Washington, D.C. 20220

Press Inquiries
If you have any inquiries, please contact our Press Office:

Troy Gravitt
Director of Communications
Troy.Gravitt@treasury.gov
202-927-8940

Legislative Affairs
For Congressional inquiries, please contact our Legislative Affairs Office:
Joseph Cwiklinski
Director of Legislative Affairs
Joseph.Cwiklinski@treasury.gov
202-927-9159

Obtaining Copies of Testimony and Reports
To obtain copies of testimony and reports, please log on to our website at www.SIGTARP.gov.
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