January 30, 2009

Four Key TARP Fixes

In our Winter ’09 issue of Proxy Disclosure Updates, we included a short piece on “Four Key TARP Fixes” that relate to executive compensation. With Congress likely to act very soon on fixing TARP – and executive compensation excesses – we hope that this short article will influence those that will be making these regulatory changes.

We have posted the article on a non-member page so that anyone can access it. Please tell your friends in Congress!

The Shameful Bonus Pool

President Obama had harsh assessment yesterday of reports that bonuses on Wall Street topped $18.4 billion in 2008. As noted in this New York Times article, he called the bonuses “shameful” and stated: “There will be time for them to make profits, and there will be time for them to get bonuses. Now’s not that time. And that’s a message that I intend to send directly to them, I expect Secretary Geithner to send to them.”

I believe that the President’s words evoke the theme that I and others have been talking about for the past several months – an extraordinary level of public anger over pay excesses. While the anger, rightly or wrongly, has largely been directed at Wall Street as a whole, the spillover effect is unquestionably going to impact other companies that have nothing to do with the credit crisis.

For some recent examples of how companies are dealing with salary and bonus in light of the economy – and in the face of public anger and scrutiny – be sure to check out Mark Borges’ Compensation Disclosure Blog on Try a no-risk trial or renew your subscription today.

One of the four key TARP fixes suggested in the piece noted above is that bonuses to the top five Senior Executive Officers of participating institutions should not be permitted in the event the company recently had layoffs of, e.g., 3% or more of the workforce over the past two or three years. In addition, all institutions would be subject mandatory disclosure of any bonuses granted to top executives while employees were laid off.

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– Dave Lynn