Executive pay, risk face more scrutiny

Kenneth Feinberg, the Treasury Department official overseeing compensation at the seven bailed-out companies, said yesterday that he hopes “to come up with consensual plans’’ for highly paid employees beyond the top 25 at each firm.

Feinberg has announced plans to slash pay for the top 25 executives at the seven companies: Bank of America Corp., American International Group, Citigroup Inc., General Motors Co., GMAC, Chrysler, and Chrysler Financial. Now he is working on designing compensation structures for 75 additional employees at each one, ranking 26 through 100.

For those executives, Feinberg intends to set up a general plan within six weeks to govern their pay.

The Federal Reserve, meanwhile, will soon begin work to get a broad picture of US banks’ pay practices, part of a larger effort to crack down on plans that encourage irresponsible risk-taking by employees, a Fed official said.

Fed Governor Daniel Tarullo, the central bank’s point person on the issue, said the Fed plans to “commence shortly’’ a so-called horizontal review to compare and contrast information across the nation’s biggest banks. Fed officials have said they don’t anticipate making the results public.

Tarullo’s remarks came as the Fed supervisors met yesterday with executives of the top 28 US banks to discuss the Fed’s compensation initiative.

The goal is to ensure that banks integrate their pay practices “completely’’ into their schemes for managing risk. The Fed’s work eventually will be coordinated with other federal bank regulators.

Under the Fed plan, the 28 biggest banks will develop their own plans to make sure compensation doesn’t spur undue risk taking.