II
Calendar No. 50
111th CONGRESS
1st Session
H. R. 1664
IN THE SENATE OF THE UNITED STATES
April 2, 2009
Received
April 22, 2009
Read the first time
April 23, 2009
Read the second time and placed on the calendar
AN ACT
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.
Prohibition on certain compensation
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:
Prohibition on certain compensation not based on performance standards
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—
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); or
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).
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:
Unreasonable and excessive compensation standards
Standards that define unreasonable or excessive for purposes of subparagraph (1)(A).
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—
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;
the performance of the individual executive or employee to whom the payment relates;
adherence by executives and employees to appropriate risk management requirements; and
other standards which provide greater accountability to shareholders and taxpayers.
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.
Conditional exemption
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.
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.
Reporting requirement
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:
over $500,000;
over $1,000,000;
over $2,000,000;
over $3,000,000; and
over $5,000,000.
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.
Community financial institution exemption
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.
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.
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.
.
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
.
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:
Executive Compensation Commission
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
).
Duties
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—
how closely executive pay is currently linked to company performance;
how closely executive pay has been linked to company performance in the past;
how executive pay can be more closely linked to company performance in the future;
the factors influencing executive pay; and
how current executive pay incentives affect executive behavior.
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.
Report
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—
recommendations for legislative action;
recommendations for executive action, including actions taken by the Department of the Treasury or any other agency for which the Commission has recommendations; and
recommendations for voluntary actions to be taken by recipients of a direct capital investment under the TARP.
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.
Composition
The Commission shall be composed of 9 members, appointed as follows:
1 member appointed by the Council of Economic Advisers.
1 member appointed by the Speaker of the House of Representatives.
1 member appointed by the Senate Majority Leader.
1 member appointed by the House Minority Leader.
1 member appointed by the Senate Minority Leader.
1 member appointed by the Chairman of the Financial Services Committee of the House of Representatives.
1 member appointed by the Ranking Member of the Financial Services Committee of the House of Representatives.
1 member appointed by the Chairman of the Banking, Housing, and Urban Affairs Committee of the Senate.
1 member appointed by the Ranking Member of the Banking, Housing, and Urban Affairs Committee of the Senate.
Each appointing entity shall name its member within 21 days of the date of the enactment of this subsection.
Any vacancy in the Commission shall be filled in the same manner as the original appointment.
Activities
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.
The Commission shall meet at least once every 30 days and may meet more frequently at the discretion of the Chairman.
The Commission shall solicit and consider policy proposals from Members of Congress, the financial sector, academia and other fields as the Commission deems necessary.
The Commission shall hold at least two public hearings, and may hold more at the discretion of the Chairman.
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.
Staff
The Chair may hire at his or her discretion up to seven professional staff members.
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.
Authorization of appropriations
There are authorized to be appropriated such sums as may be necessary to carry out this subsection.
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Passed the House of Representatives April 1, 2009.
Lorraine C. Miller,
Clerk
April 23, 2009
Read the second time and placed on the calendar