June 12, 2009
Authored by: Bryan Cave
On June 10, 2009, the Treasury announced an Interim Final Rule on the executive compensation standards for recipients of TARP funds. The Interim Final Rule supersedes all prior rules and guidance on executive compensation limitations.
The major elements of the Interim Final Rule include the following:
1. Clarification on the compensation limits to certain executives and highly compensated employees, including bonus payments, golden parachutes, and clawback provisions.
2. Appointment of a Special Master to review compensation plans of institutions receiving “exceptional” assistance.
3. Expansion of the analysis of risks posed by compensation plans for all employees, the luxury expenditures policies, and the “say-on-pay” requirement.
4. Addition of certain compensation and corporate governance standards including a prohibition on tax gross-ups, disclosure of perqs, and disclosure of the use of compensation consultants.
Treasury Secretary Timothy Geithner issued a statement to accompany the announcement. Geithner’s statement also provides summaries regarding the administration’s proposal to expand say-on-pay to all companies and the importance of independent compensation committees.