Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
As economic conditions decline, scrutiny over executive compensation increases. On February 17, President Obama signed into law the massive stimulus package (Pub. L. No. 111-5) containing a number of provisions limiting executive compensation for entities receiving funds under the Troubled Asset Relief Program (TARP). A new bill introduced last week would augment these provisions by creating additional government oversight for companies receiving TARP assistance.
The Economic Recovery Adjustment Act of 2009 (S. 431) introduced by Sen. Sheldon Whitehouse (D-RI), would – among other things – create within the Department of Justice an Office of the Taxpayer Advocate. The Advocate would have the authority to conduct ongoing audits and oversight of executive compensation received by TARP recipients. “Executive compensation” is defined under this bill as all wages, salary, deferred compensation, benefits, retirement arrangements, options, bonuses, office fixtures, goods, or other property, travel, or entertainment, vacation expenses, and any other form of compensation, obligation, or expense that is not routinely provided to all other employees of the company. This new office would also have the ability to conduct investigations, issue subpoenas and take testimony.
In addition, the Advocate would be imbued with the authority to negotiate a reduction in executive compensation if, after an audit, it is determined that the company would have become insolvent in the absence of TARP assistance. A Temporary Economic Recovery Oversight Panel comprised of five President-appointed federal bankruptcy court judges would be in charge of reviewing any negotiated reductions in executive compensation.
This bill has been referred to Senate Committee on Banking, Housing and Urban Affairs.
For more information on the executive compensation provisions contained in the stimulus package, see Littler’s ASAP: Besides COBRA: What Does the Stimulus Package Have for Employers by Ellen N. Sueda, GJ Stillson MacDonnell, Patricia A. Haim, and Chadwick M. Graham.