An administrative official told the WSJ that under the new rules, companies that receive “exceptional assistance” from taxpayers 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.
Additionally, all banks receiving help will face tougher restrictions, including new rules limiting “golden parachutes” and requirements that shareholders have a say on compensation for top executives, the news report said. Senior executive compensation plans and the rationale behind them must be submitted to a non-binding shareholder resolution.
All banks will face tougher disclosure rules on spending such as aviation services, office renovations, entertainment and holiday parties, conferences and events, and golden parachutes. The new executive pay rules will not be applied retroactively to companies that have already received aid, but they will be required to demonstrate that they have complied with the existing rules and agree to strict monitoring and oversight.
The administration official said financial institutions participating in the Generally Available Capital Access Programs can waive the $500,000 comp limit, but would have to disclose those plans and, if requested, submit to a non-binding “say on pay” shareholder resolution.
The administration official added that the president intends for these standards to mark the start of a long-term effort to institute a “sensible framework” for executive compensation that promotes sound risk management and long-term growth while preventing future financial crises, according to the news report.
The Treasury’s announcement of the new rules is here .