Senator Christopher Dodd (D-Connecticut), chairman of the Senate Banking Committee, said his proposal would affect all recipients of money from the Troubled Asset Relief Program (TARP), both past and future, according to Reuters. Dodd’s legislation would restrict pay at all TARP recipients and give the government the power to “claw back” any bonus already paid to an executive based on false information.
Under the new rules announced by President Barack Obama and Treasury Secretary Timothy Geithner on Wednesday, companies that receive aid going forward may not pay any top executive more than $500,000 a year, and any additional compensation would have to be in restricted stock that will not vest until taxpayers have been repaid (see Obama, Geithner Announce New Exec Pay Rules for Bailout Recipients ).
Specifically, Reuters reports, Dodd’s amendment would take the following actions involving companies that have received TARP money:
- Ban bonuses for the 25 most highly-paid employees.
- Require each to include on its annual proxy statement a “say on pay” proposal allowing shareholders to vote on the company’s executive compensation program.
- Require the Treasury Department to review bonus awards already paid to determine if any were “excessive” and to seek reimbursement if so.
- Give the government the power to claw back any bonus paid to an executive based on reported earnings or other criteria later found to be materially inaccurate.
- Require each board of directors’ compensation committee to be composed only of independent directors.
- Require each board of directors to ban luxury expenditures such as private jets.
- Prohibit compensation plans with incentives for employees to take unnecessary and excessive risks.
“There is absolutely no reason why hardworking American taxpayers should be financing, directly or indirectly, excessive compensation for corporate executives whose decisions, in many cases, have crippled their firms and weakened the broader economy,” Dodd said in a statement, according to the news report.
The measure will be attached to the economic stimulus package the Senate is now debating.