Bailout Bonuses - Round 2
In a more subdued response to the AIG bonus brouhaha than last week, the House Financial Services Committee yesterday approved legislation that would amend the Emergency Economic Stabilization Act to prohibit companies receiving TARP money from paying “unreasonable and excessive compensation and compensation not based on performance standards.” Two Republicans, Reps. Ed Royce (CA) and Walter B. Jones (NC), broke ranks to vote with the committee’s Democrats in favor of the bill (H.R. 1664). Some of our Congressional sources have said the full House may vote on H.R. 1664 as early as next week. The Senate, however, is almost certain not to address executive compensation until after it returns on April 20th from the spring Congressional recess. Democratic leaders from both sides of the Capitol have greatly dialed down the executive compensation rhetoric since last week.
Under H.R. 1664, the Treasury Secretary, with the members of the Financial Institutions Examination Council, would have a month to define “unreasonable and excessive compensation” and set performance based standards that companies would use to determine circumstances under which a bonus or retention payment would be allowed. Examples of the standards Treasury is to include are the stability of the financial institution; its ability to repay the government; individual performance; employees’ adherence to risk management requirements; and any others that would provide greater accountability to shareholders and taxpayers.
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