Pay czar’s personality is as big as the problems he’s asked to solve
If the Harvard Law students settling into the Friday afternoon advanced seminar on mediation were expecting a self-effacing peacemaker as their guest speaker, they guessed wrong.
Kenneth Feinberg - maestro of some of the nation’s most complex settlements, now President Obama’s “pay czar’’ - walks into the room and begins speaking with a booming voice, thick with a Massachusetts accent.
He quickly launches into a theatrical review of some of the contentious legal logjams he has helped resolve, from mega-liability cases concerning Agent Orange and asbestos, to compensation for victims of the Sept. 11 terrorist attack.
He recounts an encounter with one woman whose fiance died on Sept. 11: “Mr. Feinberg! We were engaged! The wedding invitations had already been mailed. I deserve a settlement.’’
Feinberg’s big personality does more than make him stand out in a field noted for its anonymity. He has become, in the words of professor Robert Bordone, who teaches the Harvard Law seminar, “like a national problem solver.’’
Though a native of Massachusetts, Feinberg, 64, has worked in Washington, D.C., for three decades. But he will soon be keeping a higher profile in Boston, where he was just appointed chairman of the board at the John F. Kennedy Library Foundation. Feinberg is an old Kennedy operative; his first job in Washington was for Senator Edward M. Kennedy, where he eventually rose to chief of staff.
The library position is not ceremonial. Next year the institution will launch consecutive 50th anniversary celebrations of JFK’s presidential campaign and administration, an ambitious undertaking that Feinberg will help guide.
Feinberg steps in at a time when the library’s longstanding leadership was rapidly drained. In addition to Senator Edward Kennedy’s death, the library’s former chairman, Paul Kirk, recently left to be the senator’s interim successor, and its chief executive, John Shattuck, decamped to Budapest to run Central European University. Shattuck was replaced by David McKean, a top aide to Massachusetts’ other senator, John Kerry.
Feinberg said that he was surprised by the speed of his elevation from board member to chairman, and he’s bracing for a host of challenges. He will be heavily involved in developing the library’s digital archive project, which will launch on the 50th anniversary of John F. Kennedy’s Jan. 20, 1961, inauguration. The digital library will make Kennedy papers, records, photographs, and recordings available over the Internet.
Feinberg will also help craft the library’s relationship with the Edward M. Kennedy Institute for the US Senate, soon to begin construction next door on Columbia Point in Dorchester.
Caroline Kennedy, President Kennedy’s daughter and president of the library foundation, said she was relieved when Feinberg accepted the position.
“Sometimes you get the leader you need when you need him, and Ken is that for the Kennedy Library Foundation,’’ she said. “Ken has a gift for bringing people together and tackling the hardest problems.’’
In Washington, Feinberg’s job as pay czar is to determine the pay of the top executives at seven financial firms that received taxpayer bailout money. His mission is to fix the pay structure so executives no longer have huge monetary incentives to pursue risky, and ultimately damaging, investments.
If he succeeds at redefining “reasonable’’ compensation without sparking a wholesale exit of top workers at the companies, then Feinberg may bring about a profound change within the larger corporate community: a dismantling of the outsized paychecks that boards of directors hand their executives.
“What Feinberg negotiates could become a kind of de facto benchmark of what the government finds acceptable,’’ said Claudia H. Allen, who chairs the corporate governance practice at Chicago law firm Neal, Gerber & Eisenberg. “A lot of compensation committees will be asking, ‘Would this be good for our company?’ ’’
When he first examined the pay packages at the seven firms - Bank of America, Citigroup, American International Group, General Motors, GMAC, Chrysler, and Chrysler Financial - Feinberg, who operates out of a small Washington-based firm that specializes in dispute resolution, said he wasn’t prepared for what he found.
“I expected a gap,’’ Feinberg said as he sipped coffee in a Cambridge hotel room before his Harvard Law lecture. “But what I found was more like a chasm between what the people on Wall Street thought they were worth and what citizens thought they ought to get.’’
He has tried to close that chasm. Bank of America’s outgoing chief executive, Ken Lewis, agreed to cut his $1.5 million salary this year - to nothing. Across the board, Feinberg ordered executive salaries cut, by an average of 90 percent, with most falling below $500,000. Personal expenses for perks such as cars and jets were capped at $25,000, unless Feinberg approves a higher amount. Feinberg also structured stock awards and bonuses so that they reward long-term performance of the company.
Already he’s been met with resistance and evasion. After several AIG executives threatened to quit over his pay limitations, Feinberg reportedly agreed to exempt them from a $500,000 salary cap, Bloomberg News reported last night. Citigroup went so far as to sell its Phibro trading unit rather than cut the $100 million package of its CEO and impose pay limits on top traders.
These developments could blunt the effect Feinberg may have on corporate compensation, and already he is treading carefully by acknowledging concern about how his limits could affect the companies. He has been in this position before, with stakes as high, and emotions higher.
Charles Wolf, whose wife died in one of the World Trade Center towers, recalled that when he first heard about Feinberg being put in charge of the victims’ compensation fund, he expected a “my way or the highway personality.’’
They didn’t hit it off. Wolf so disagreed with Feinberg’s initial approach that he started a blog, FixtheFund.org. Eventually the two reached an accommodation.
“He’s brilliant,’’ Wolf said recently. “He really bent over backwards to make that settlement a success.’’
Boston attorney Ronald Gluck, who represented the family of a young man killed Sept. 11, remembered how well Feinberg listened when the family presented its case to him.
“There’s no doubt Kenneth Feinberg is a dynamic person with a strong personality,’’ Gluck said. “He’s the kind of person who can deliver a strong message with great integrity.’’
Says Bordone, the professor of the Harvard mediation class: “There are very few situations where you would put the resolution in the hands of one person. But people tend to feel comfortable saying, ‘Let’s let Ken do it.’ ’’
D.C. Denison can be reached at email@example.com.