DODD COMMENDS ADMINISTRATION'S ANNOUNCEMENT ON EXECUTIVE PAY

WASHINGTON, DC – Senator Chris Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing and Urban Affairs, today applauded the Administration’s plans to limit excessive compensation for executives at firms receiving Troubled Asset Relief Program (TARP) funds. Dodd also announced that he will be introducing an amendment to the American Recovery and Reinvestment Act to apply further executive compensation restrictions to all TARP recipients, and to empower the Treasury Secretary to tighten existing provisions of the law to “claw back” any bonus or compensation paid to an executive based on false earnings reports or anything else later found to be materially inaccurate or misrepresentative of that company’s financial status. 

“The President told the world just weeks ago that a new era of responsibility has begun – and today’s announcement demonstrates how seriously he is taking that charge.  There is absolutely no reason why hard-working 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.  To that end, I intend to put forward an amendment to broaden the application of compensation restrictions to all TARP recipients, and to ensure that the government gets its money back if it is determined that taxpayer dollars were used improperly to pay big bonuses at these financial institutions.  I look forward to continuing to work with the Administration to ensure that taxpayer dollars are used only for taxpayers’ benefit.”

A summary of the amendment is below:

 

The Dodd Amendment would apply strong executive compensation requirements consistently to ALL recipients of TARP funds, regardless of whether they receive a capital injection, sell troubled assets at auction or have other types of transactions.  The amendment:

·         Bans bonuses for most highly paid executives of TARP-recipient firms: Prohibits TARP recipients from paying a bonus, retention award, or other similar incentive compensation to the 25 most highly-paid employees “or such higher number as the Secretary of the Treasury may determine is in the public interest with respect to any TARP recipient.”

·         Requires a Retroactive Review: The Secretary of the Treasury must review bonus awards paid to executives of TARP recipients to determine whether any payments were excessive, inconsistent with the purposes of the Act or the TARP or otherwise contrary to public interest and, if so, seek to negotiate with the recipient and the subject employee for appropriate reimbursement to the Government.

·         Requires each TARP recipient to include on annual proxy statement a “say on pay” proposal - or advisory shareholder vote on the company’s executive cash compensation program.

·         Allows for the government to claw back any bonus or incentive compensation paid to an executive based on reported earnings or other criteria later found to be materially inaccurate.

·         Prohibits compensation plans that would encourage manipulation of reported earnings.

·         Requires the Board Compensation Committee of each TARP recipient to be composed entirely of independent directors; requires the Committee to evaluate compensation plans and their potential risk to the financial health of the company.

·         Requires the Board of Directors to adopt company-wide policy on luxury expenditures.

·         Prohibits golden parachutes to senior executives.

·         Prohibits a compensation plan that has incentives for employees to take unnecessary and excessive risks that threaten the value of the company.

 

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