Kenneth R. Feinberg

Special Pay Master (Since June 2009); Head of BP Claims Fund (Since June 2010)

(Getty Images)

Why He Matters

What is a life worth? That's the decision Feinberg has been forced to make as a mediator in nearly all of America's crises, from 9/11 to the Virgina Tech shooting to fixing salaries for corporate titans following the financial crisis.

At the start of the Obama administration, Feinberg was charged with setting the salaries of the top 100 executives at many of the firms rescued by the federal government in the 2008-2009 recession as "special pay master." The companies make up a once-prestigious roster of U.S. corporate titans like American International Group (AIG), Citibank, Chrysler, Chrysler Financial, General Motors, GMAC and Bank of America.

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Background

At a Glance

Career History: Founder and managing partner of Feinberg Rozen LLP (1992 to present); Kaye, Scholer, Fierman, Hays & Handler (1980 to 1992); Chief of staff for Sen. Edward Kennedy (1978 to 1980)
Birthday: Oct. 23, 1945
Hometown: Brockton, Mass.

Alma Mater: University of Massachusetts, B.A. (history), 1967; New York University, J.D., 1970
Spouse: Dede Feinberg
Web site

Path to Power

Born to a father who sold tires and a mother who worked as a bookkeeper in Brockton, Mass., Feinberg showed interest in acting at an early age.

Performing comedy skits in grammar school and starring in high-school plays, it appeared Feinberg would pursue a role on stage instead of in a courtroom. But after graduating in 1967 from the University of Massachusetts, Feinberg's father suggested he use his acting skills to sway juries. Feinberg's father feared he would end up working as a Broadway waiter instead of a famous actor.

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Feinberg listened, moving to New York City to attend law school. After school, Feinberg clerked for New York State Court of Appeals Judge Stanley Fuld for two years before moving to the U.S. attorney's office in Manhattan. While performing in the courtrooms, Feinberg worked alongside then-future New York City Mayor Rudolph Giuliani (R).

Kennedy Aide

After three years, Feinberg heard then-Sen. Edward M. Kennedy (D-Mass) was looking for a junior counsel to work on the Senate Judiciary Committee. Feinberg worked for Kennedy until 1980, eventually becoming the senator's chief of staff, when the draw to private practice became too strong.

He joined the New York law firm Kaye, Scholer, Fierman, Hays & Handler. The practice eventually asked Feinberg to create a Washington, D.C., arm. While working for Kaye, Scholer, Feinberg began mediating conflicts between two bitter parties, an experience that would greatly change his legal role. His first case was a class-action lawsuit filed by 250,000 Vietnam veterans against the manufacturers of an herbicide called "Agent Orange" that was used by U.S. forces to kill foliation hiding enemy combatants. The case, which had stagnated in court proceedings for over eight years, was settled in six weeks for $180 million.

Mediation Practice

In 1992, Feinberg started The Feinberg Group. It specialized in mediation, handling cases that ranged from asbestos settlements to determining the fair market value of the Zapruder film, which showed the John F. Kennedy assassination.

But his most noteworthy case was the 33 months of pro-bono work he did following 9/11. Feinberg determined how much each victim of the attack would receive from the federal government's September 11th Victim Compensation Fund.

He also disbursed money from the fund established for victims of the April 2007 Virgina Tech shooting.

Feinberg has also taught classes at many law schools, including Georgetown University, New York University and Columbia University. He is president of the Washington National Opera.

The Issues

In February 2009, the Obama administration proposed a $500,000 cap on executive pay following the 2008-2009 credit crisis.

Two weeks later, Congress approved the $787 billion stimulus bill. Buried in the bill was a provision written by Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) that limited executive pay for companies receiving TARP funds. The language also imposed restrictions on executive bonuses. Under the rule, executives earning $1 million annually could receive up to $500,000 in bonus pay. The language also increased the number of executives that would fall under the pay restriction. If a company received more than $500 million from TARP then the government could restrict the pay of its 25 most senior executives.

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But causing a massive political uproar, the language had been altered at the behest of Treasury officials in conference committee to honor back contracts for bonuses, according to Dodd. The altered language allowed a payout of $165 million to insurance giant AIG, leading to a massive political uproar.

In June 2009, Treasury officially implemented Dodd's rules. In addition, the administration named Feinberg as its special master of compensation, giving him the right to reject executive pay plans at seven firms that received a "significant" amount of TARP funds.

The seven firms were AIG, Citigroup, Bank of America Corp., General Motors, GMAC, Chrysler and Chrysler Financial, which received nearly $250 billion in total from TARP. In August 2009, these seven firms submitted pay proposals for their top 25 employees.

2009 Executive Compensation

In October 2009, Feinberg announced his decision regarding pay for the top 25 executives at seven companies. Feinberg concluded that the executives at AIG, Citigroup, Bank of America, GM, GMAC, Chrysler and Chrysler Financial will need to cut cash salaries by more than 90 percent for 2009. This means if an executive was making $1 million dollars a year in 2008, the executive would make about $100,000 in 2009.

Feinberg decided that executives can still receive stock as compensation, but they must wait two years to sell one-third of that stock. After three years, the executives can sell two-thirds of the stock, and after four years they can sell the entire stock. The executives will get to keep the stock options even if they leave the company.

Executives in AIG's Financial Products unit, which was blamed for the company's implosion, will not receive any stock options and will not earn more than $200,000 a year. Chrysler Financial executives may only receive a cash salary.

2010 Executive Compensation

By March 2010, Feinberg still had the power to dictate the compensation for the top 25 executives at five companies that had yet to return government TARP funds. Feinberg ruled that the executives at AIG, GM, GMAC, Chrysler Group and Chrysler Financial Corp. would have to decrease 2010 compensation by 15 percent from their 2009 salary.

Feinberg no longer had authority to rule on Bank of America or Citigroup compensation because the banks returned TARP funds in December 2009.

9/11 Compensation Fund

Days after the worst terror attack in U.S. history, Congress signed the Air Transportation Safety and System Stabilization Act that bailed out the airline industry. The bill also created the September 11th Victim Compensation Fund, which provided tax-free monetary compensation for all families who lost loved ones in the attack, as well as people injured trying to escape the rubble. Participation in the fund meant the families waived their right to sue the airlines and other entities.

The unprecedented law empowered one person to decide how much each victim would receive in compensation. Feinberg became the special master of the fund, working pro-bono for 33 months. He listened to nearly 1,500 testimonials from families whose loved ones couldn't escape the collapsing steel.

Feinberg worked to persuade victims to take the money instead of going to court and suing the airlines. The compensation was required to reflect the victim's lifelong earnings potential, setting up a quandary: victims with a higher annual salary, such as bankers, would receive far more than someone like a busboy. Rewards varied from 250,000 to $4 million; in a few cases, families received more.

Many families disagreed with the amount awarded to them, and Feinberg became a sounding board for their grief and disappointment. "Your offer spits on my wife, spits on my son, on my father-in-law," said Steve Campbell during one of many meetings Feinberg held with victims. "I gotta watch my mother-in-law and father-in-law pop pills. My son, who now I gotta rely on family stories to tell him about his mother -- and you say $250,000? You ain't even close."

Feinberg convinced 97 percent of the eligible victims and families to participate in the compensation fund, doling out nearly $7 billion to more than 5,000 applicants, with an average compensation of nearly $2 million. "The 9/11 fund was an aberration -- an argument that I know rings very hollow with victims," said Feinberg when talking to Northwestern Law students in September 2005. "But do we want it to be a permanent part of American law? Should it be a statute that is triggered when there's a catastrophe -- a no-fault administrative remedy like the 9/11 fund? I say, `No.'"

The Network

Feinberg worked as the late Sen. Edward M. Kennedy's chief of staff in the late 1970s. While there, he met and negotiated with Sen. Orrin G. Hatch (R-Utah). When Feinberg was named to his role as head of the 9/11 Victim Compensation Fund, Hatch supported the appointment. Former Sen. Chuck Hagel (R-Neb.) urged President George W. Bush to name Feinberg as special master of the 9/11 fund.

While working in the U.S. attorney's offices in New York, Feinberg worked with former New York City Mayor Rudolph Giuliani (R).

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Campaign Contributions

While working with the Feinberg Group, Feinberg donated over $150,000, nearly all of which has gone to Democratic candidates and political action committees. In 2007, Feinberg donated $2,300 to 2008 presidential candidate Rudolph Giuliani (R). The other Republican cause to which Feinberg donated was former Sen. Chuck Hagel's (Neb.) leadership PAC called Sandhills. From 1999 to 2007, Feinberg donated $30,000 to Sandhills. In 2007, Feinberg gave Obama $6,900.

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