Treasury Pay Cuts Could End Up in Court
Oct. 22, 2009
WASHINGTON (UPI) -- Pay cuts imposed on seven bailed out U.S. firms could wind up being decided by lawsuits, a former American International Group Inc. employee said.
The Treasury Department is poised to order salaries slashed at firms that received extraordinary assistance from the Troubled Asset Relief Program, including AIG, where total compensation for the top 25 executives will be capped at $200,000, The New York Times reported Thursday.
But earlier this year AIG sought legal advise on the matter. Attorneys told the company it was legally bound to fulfill contractual obligations on salary matters.
That legal advise could be turned against AIG.
"They've painted themselves into a box," the former employee said.
The Treasury's plan includes cutting cash salaries about 90 percent with some of the earnings replaced by stock options that cannot be sold for years, a measure meant to inject more concern for the long-term health of the company into the mix.
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