When it comes to figuring out what to pay someone after the unthinkable happens, Kenneth R. Feinberg is obviously the best.
He must be, because he keeps taking on what seem to be thankless tasks:
* Deciding payments from a $7 billion special- compensation fund set up by Congress for those injured or killed in the Sept. 11, 2001, terror attacks.
* Setting compensation for the 25 highest-paid executives of the seven companies that received the biggest bailouts from the Treasury Department in the 2008 financial crisis.
* And, since late August, administering the $20 billion fund set up by BP P.L.C. to pay claims to those who suffered losses from the April explosion of a rig in the Gulf of Mexico that led to a massive oil spill.
It was his tenure as the Treasury Department’s so-called pay czar that brought Feinberg to the Wharton School on Friday for a speech at a conference on corporate governance and the global financial crisis.
For about 45 minutes, he discussed his 16 months of difficult work trying to determine what executives are worth and whether his solutions would have any lasting effect.
“I’ve become a nationally recognized philanthropist with other people’s money,” Feinberg said.
In mediating disputes over money, it’s good to have a sense of humor, and Feinberg’s was certainly on display. He chafed at the “uncomfortable title” of czar that the media had bestowed upon him. “It conveyed a notion of imperial, arbitrary authority,” he said.
When he agreed to accept the job offered by Treasury Secretary Timothy Geithner, Feinberg said, he thought the task “would be done quickly, efficiently, and out of the public eye.”
After all, he had oversight authority over only 175 executives at companies that had received “exceptional assistance” under the Troubled Asset Relief Program: American International Group Inc., Bank of America Corp., Chrysler L.L.C., Chrysler Financial, Citigroup Inc., General Motors Co., and GMAC L.L.C.
But what Feinberg initially considered to be a “sideshow” to the global financial meltdown drew the spotlight from the “popular revulsion” over the outsize pay packages given to bankers.
Feinberg, 64, was dismissive of the “vanilla prescriptions” offered up by academia and regulators that pay should not encourage excessive risk and that it be tied to company performance. “I had to actually calculate the money,” he said. “What is this guy worth? How come? What’s the basis for it?”
A company would want to pay its chief financial officer a total of $4 million, but Feinberg would counter with $2 million. Inevitably, a company representative would tell him, “You’ve got to understand, Mr. Feinberg, our CFO is not like the normal CFO.”
They all made the same argument, he said: “If you don’t pay us, we will not be competitive. We will lose our key people.”
At last check, Feinberg said, 85 percent of those he’d set the compensation for in 2009 were still on the job in 2010. A mass exodus did not occur. But he conceded that he didn’t know the reasons for the 15 percent that did leave.
He said he was not sure whether the work he did as special master for TARP executive compensation would have a lasting effect on practices in the companies he oversaw.
He doesn’t equate what he did with affecting corporate governance at all. Implementation of the Dodd-Frank financial-regulation law will have more effect on corporate governance, he said, “than my setting pay for 175 people.”
With that, he headed back to Washington to administer the Gulf Coast Claims Facility, which has paid $349.3 million to 26,448 claimants in its first month. In all, it has received more than 68,000 claims.
That works out to a little more than $13,000 per claim, a fraction of the compensation he’d been overseeing at Treasury. It’s an immense task, trying to put a price on the interrupted livelihoods of fishermen, shrimpers, and others.
But then, figuring out what someone is worth is what this philanthropist with other people’s money does.