HR 1664 EHPCSCommentsClose CommentsPermalink

To amend the executive compensation provisions of the Emergency Economic Stabilization Act of 2008 to prohibit unreasonable and excessive compensation and compensation not based on performance standards.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, CommentsClose CommentsPermalink

SECTION 1. PROHIBITION ON CERTAIN COMPENSATION.

(a) Prohibition on Certain Compensation Not Based on Performance Standards- Section 111 of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5221) is amended by redesignating subsections (e) through (h) as subsections (f) through (i), and inserting after subsection (d) the following:CommentsClose CommentsPermalink





‘(e) Prohibition on Certain Compensation Not Based on Performance Standards-CommentsClose CommentsPermalink





‘(1) PROHIBITION- No financial institution that has received or receives a direct capital investment under the Troubled Assets Relief Program under this title, or with respect to the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, or a Federal home loan bank, under the amendments made by section 1117 of the Housing and Economic Recovery Act of 2008, may, while that capital investment remains outstanding, make a compensation payment, other than a longevity bonus or a payment in the form of restricted stock, to any executive or employee under any existing compensation arrangement, or enter into a new compensation payment arrangement, if such compensation payment or compensation payment arrangement--CommentsClose CommentsPermalink





‘(A) provides for compensation that is unreasonable or excessive, as defined in standards established by the Secretary, in consultation with the Chairperson of the Congressional Oversight Panel established under section 125, in accordance with paragraph (2); orCommentsClose CommentsPermalink





‘(B) includes any bonus or other supplemental payment, whether payable before employment, during employment, or after termination of employment, that is not directly based on performance-based measures set forth in standards established by the Secretary in accordance with paragraph (2).CommentsClose CommentsPermalink





An institution shall not become subject to the requirements of this paragraph as a result of doing business with a recipient of a direct capital investment under the TARP or under the amendments made by the Housing and Economic Recovery Act of 2008.CommentsClose CommentsPermalink





‘(2) STANDARDS- Not later than 30 days after the date of enactment of this subsection, the Secretary, with the approval of the agencies that are members of the Federal Financial Institutions Examination Council, and in consultation with the Chairperson of the Congressional Oversight Panel established under section 125, shall establish the following:CommentsClose CommentsPermalink





‘(A) UNREASONABLE AND EXCESSIVE COMPENSATION STANDARDS- Standards that define ‘unreasonable or excessive’ for purposes of subparagraph (1)(A).CommentsClose CommentsPermalink





‘(B) PERFORMANCE-BASED STANDARDS- Standards for performance-based measures that a financial institution must apply when determining whether it may provide a bonus or retention payment under paragraph (1)(B). Such performance measures shall include--CommentsClose CommentsPermalink





‘(i) the stability of the financial institution and its ability to repay or begin repaying the United States for any capital investment received under this title;CommentsClose CommentsPermalink





‘(ii) the performance of the individual executive or employee to whom the payment relates;CommentsClose CommentsPermalink





‘(iii) adherence by executives and employees to appropriate risk management requirements; andCommentsClose CommentsPermalink





‘(iv) other standards which provide greater accountability to shareholders and taxpayers.CommentsClose CommentsPermalink





‘(3) CLARIFICATION RELATING TO SEVERANCE PAY- For purposes of this subsection, a compensation payment or compensation payment arrangement shall not include a severance payment paid by an employer in the ordinary course of business to an employee who has been employed by the employer for a minimum of 5 years upon dismissal of that employee, unless such severance payment is in an amount greater than the annual salary of such employee or $250,000.CommentsClose CommentsPermalink





‘(4) CONDITIONAL EXEMPTION-CommentsClose CommentsPermalink





‘(A) REPAYMENT AGREEMENT- Paragraph (1) shall not apply to a financial institution that has entered into a comprehensive agreement with the Secretary to repay the United States, in accordance with a schedule and terms established by the Secretary, all outstanding amounts of any direct capital investment or investments received by such institution under this title.CommentsClose CommentsPermalink





‘(B) DEFAULT- If the Secretary determines that an institution that has entered into an agreement as provided for in subparagraph (A) has defaulted on such agreement, the Secretary shall require that any compensation payments made by such institution that would have been subject to paragraph (1) if the institution had not entered into such an agreement be surrendered to the Treasury.CommentsClose CommentsPermalink





‘(5) REPORTING REQUIREMENT-CommentsClose CommentsPermalink





‘(A) IN GENERAL- Any financial institution that is subject to the requirements of paragraph (1) shall, not later than 90 days after the date of enactment of this subsection and annually on March 31 each year thereafter, transmit to the Secretary, who shall make a report which states how many persons (officers, directors, and employees) received or will receive total compensation in that fiscal year in each of the following amounts:CommentsClose CommentsPermalink





‘(i) over $500,000;CommentsClose CommentsPermalink





‘(ii) over $1,000,000;CommentsClose CommentsPermalink





‘(iii) over $2,000,000;CommentsClose CommentsPermalink





‘(iv) over $3,000,000; andCommentsClose CommentsPermalink





‘(v) over $5,000,000.CommentsClose CommentsPermalink





The report shall distinguish amounts the institution considers to be a bonus and the reason for such distinction. The name or identity of persons receiving compensation in such amounts shall not be required in such reports. The Secretary shall make such reports available on the Internet. Any financial institution subject to this paragraph shall issue a retrospective annual report for 2008 and both a prospective and retrospective annual report for each subsequent calendar year until such institution ceases to be subject to this paragraph.CommentsClose CommentsPermalink





‘(B) TOTAL COMPENSATION DEFINED- For purposes of this paragraph, the term ‘total compensation’ includes all cash payments (including without limitation salary, bonus, retention payments), all transfers of property, stock options, sales of stock, and all contributions by the company (or its affiliates) for that person’s benefit or for the benefit of that person’s immediate family members.CommentsClose CommentsPermalink





‘(6) COMMUNITY FINANCIAL INSTITUTION EXEMPTION-CommentsClose CommentsPermalink





‘(A) IN GENERAL- The Secretary may exempt community financial institutions from any of the requirements of this subsection, when the Secretary finds that such an exemption is consistent with the purposes of this subsection.CommentsClose CommentsPermalink





‘(B) COMMUNITY FINANCIAL INSTITUTION DEFINED- For the purposes of this paragraph, the term ‘community financial institution’ means a financial institution that receives or received a direct capital investment under the Troubled Asset Relief Program under this title of not more than $250,000,000.CommentsClose CommentsPermalink





‘(7) COMPENSATION CONSIDERATIONS UNDER THE STANDARDS- In establishing standards under this subsection, the Secretary shall consider as compensation any transfer of property, payment of money, or provision of services by the financial institution that causes any increase in wealth on the part of an executive or employee.’.CommentsClose CommentsPermalink





(b) Revision to Rule of Construction- Section 111(b)(3)(D)(iii) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5221(b)(3)(D)(iii)) is amended by inserting before the period the following: ‘, except that an entity subject to subsection (e) may not, while a capital investment described in that subsection remains outstanding, pay a bonus or other supplemental payment that is otherwise prohibited by clause (i) without regard to when the arrangement to pay such a bonus was entered into’.CommentsClose CommentsPermalink

SEC. 2. EXECUTIVE COMPENSATION COMMISSION.

Section 111 of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5221), as amended by section 1, is further amended by adding at the end the following new subsection:CommentsClose CommentsPermalink





‘(j) Executive Compensation Commission-CommentsClose CommentsPermalink





‘(1) ESTABLISHMENT- There is hereby established a commission to be known as the ‘Commission on Executive Compensation’ (hereinafter in this subsection referred to as the ‘Commission’).CommentsClose CommentsPermalink





‘(2) DUTIES-CommentsClose CommentsPermalink





‘(A) STUDY REQUIRED- The Commission shall conduct a study of the executive compensation system for recipients of a direct capital investment under the TARP. In conducting such study, the Commission shall examine--CommentsClose CommentsPermalink





‘(i) how closely executive pay is currently linked to company performance;CommentsClose CommentsPermalink





‘(ii) how closely executive pay has been linked to company performance in the past;CommentsClose CommentsPermalink





‘(iii) how executive pay can be more closely linked to company performance in the future;CommentsClose CommentsPermalink





‘(iv) the factors influencing executive pay; andCommentsClose CommentsPermalink





‘(v) how current executive pay incentives affect executive behavior.CommentsClose CommentsPermalink





‘(B) CONSIDERATION OF PROPOSALS- The Commission shall consider, in addition to any recommendations made by members of the Commission or outside advisers, the effects of implementing increased shareholder voice in executive compensation.CommentsClose CommentsPermalink





‘(3) REPORT-CommentsClose CommentsPermalink





‘(A) IN GENERAL- Not later than 90 days after the date on which all members of the Commission have been appointed, the Commission shall deliver a report to the President and to the Congress containing--CommentsClose CommentsPermalink





‘(i) recommendations for legislative action;CommentsClose CommentsPermalink





‘(ii) recommendations for executive action, including actions taken by the Department of the Treasury or any other agency for which the Commission has recommendations; andCommentsClose CommentsPermalink





‘(iii) recommendations for voluntary actions to be taken by recipients of a direct capital investment under the TARP.CommentsClose CommentsPermalink





‘(B) MINORITY VIEWS- The report required under subparagraph (A) shall be accompanied by any separate recommendations that members of the Commission wish to make, but that were not agreed upon by the Commission for purposes of the report required under subparagraph (A). Such separate recommendations must take the form of a proposal for aligning executive pay with the long-term health of the company.CommentsClose CommentsPermalink





‘(4) COMPOSITION-CommentsClose CommentsPermalink





‘(A) The Commission shall be composed of 9 members, appointed as follows:CommentsClose CommentsPermalink





‘(i) 1 member appointed by the Council of Economic Advisers.CommentsClose CommentsPermalink





‘(ii) 1 member appointed by the Speaker of the House of Representatives.CommentsClose CommentsPermalink





‘(iii) 1 member appointed by the Senate Majority Leader.CommentsClose CommentsPermalink





‘(iv) 1 member appointed by the House Minority Leader.CommentsClose CommentsPermalink





‘(v) 1 member appointed by the Senate Minority Leader.CommentsClose CommentsPermalink





‘(vi) 1 member appointed by the Chairman of the Financial Services Committee of the House of Representatives.CommentsClose CommentsPermalink





‘(vii) 1 member appointed by the Ranking Member of the Financial Services Committee of the House of Representatives.CommentsClose CommentsPermalink





‘(viii) 1 member appointed by the Chairman of the Banking, Housing, and Urban Affairs Committee of the Senate.CommentsClose CommentsPermalink





‘(ix) 1 member appointed by the Ranking Member of the Banking, Housing, and Urban Affairs Committee of the Senate.CommentsClose CommentsPermalink





‘(B) Each appointing entity shall name its member within 21 days of the date of the enactment of this subsection.CommentsClose CommentsPermalink





‘(C) Any vacancy in the Commission shall be filled in the same manner as the original appointment.CommentsClose CommentsPermalink





‘(5) ACTIVITIES-CommentsClose CommentsPermalink





‘(A) The Chairman of the Financial Services Committee of the House of Representatives shall select one member to serve as the Chairman of the Commission, and such Chairman will call to order the first meeting of the Commission within 10 business days after the date on which all members of the Commission have been appointed.CommentsClose CommentsPermalink





‘(B) The Commission shall meet at least once every 30 days and may meet more frequently at the discretion of the Chairman.CommentsClose CommentsPermalink





‘(C) The Commission shall solicit and consider policy proposals from Members of Congress, the financial sector, academia and other fields as the Commission deems necessary.CommentsClose CommentsPermalink





‘(D) The Commission shall hold at least two public hearings, and may hold more at the discretion of the Chairman.CommentsClose CommentsPermalink





‘(6) ACTIONS BY THE COMMISSION- A decision of a majority of commissioners present at a meeting of the Commission shall constitute the decision of the Commission where the Commission is given discretion to act, including but not limited to, recommendations to be made in the report described in paragraph 3.CommentsClose CommentsPermalink





‘(7) STAFF- The Chair may hire at his or her discretion up to seven professional staff members.CommentsClose CommentsPermalink





‘(8) TERMINATION- The Commission shall terminate 30 days after the date on which the Commission submits its report to the President and the Congress under paragraph 3.CommentsClose CommentsPermalink





‘(9) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated such sums as may be necessary to carry out this subsection.’.CommentsClose CommentsPermalink

Passed the House of Representatives April 1, 2009.CommentsClose CommentsPermalink

Attest:CommentsClose CommentsPermalink

Clerk.

To amend the executive compensation provisions of the Emergency Economic Stabilization Act of 2008 to prohibit unreasonable and excessive compensation and compensation not based on performance standards.CommentsClose CommentsPermalink