12 USC 5221 - Executive compensation and corporate governance

U.S Code last checked for updates: Nov 22, 2024

§ 5221.

Executive compensation and corporate governance

(a)

Definitions

For purposes of this section, the following definitions shall apply:

(1)

Senior executive officer

(2)

Golden parachute payment

(3)

TARP recipient

(4)

Commission

(5)

Period in which obligation is outstanding; rule of construction

(b)

Executive compensation and corporate governance

(1)

Establishment of standards

During the period in which any obligation arising from financial assistance provided under the TARP remains outstanding, each TARP recipient shall be subject to—

(A)

the standards established by the Secretary under this section; and

(B)

the provisions of section 162(m)(5) of title 26, as applicable.

(2)

Standards required

(3)

Specific requirements

The standards established under paragraph (2) shall include the following:

(A)

Limits on compensation that exclude incentives for senior executive officers of the TARP recipient to take unnecessary and excessive risks that threaten the value of such recipient during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding.

(B)

A provision for the recovery by such TARP recipient of any bonus, retention award, or incentive compensation paid to a senior executive officer and any of the next 20 most highly-compensated employees of the TARP recipient based on statements of earnings, revenues, gains, or other criteria that are later found to be materially inaccurate.

(C)

A prohibition on such TARP recipient making any golden parachute payment to a senior executive officer or any of the next 5 most highly-compensated employees of the TARP recipient during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding.

(D)

(i)

A prohibition on such TARP recipient paying or accruing any bonus, retention award, or incentive compensation during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding, except that any prohibition developed under this paragraph shall not apply to the payment of long-term restricted stock by such TARP recipient, provided that such long-term restricted stock—

(I)

does not fully vest during the period in which any obligation arising from financial assistance provided to that TARP recipient remains outstanding;

(II)

has a value in an amount that is not greater than ⅓ of the total amount of annual compensation of the employee receiving the stock; and

(III)

is subject to such other terms and conditions as the Secretary may determine is 1

 So in original. Probably should be “are”.

in the public interest.

(ii)

The prohibition required under clause (i) shall apply as follows:

(I)

For any financial institution that received financial assistance provided under the TARP equal to less than $25,000,000, the prohibition shall apply only to the most highly compensated employee of the financial institution.

(II)

For any financial institution that received financial assistance provided under the TARP equal to at least $25,000,000, but less than $250,000,000, the prohibition shall apply to at least the 5 most highly-compensated employees of the financial institution, or such higher number as the Secretary may determine is in the public interest with respect to any TARP recipient.

(III)

For any financial institution that received financial assistance provided under the TARP equal to at least $250,000,000, but less than $500,000,000, the prohibition shall apply to the senior executive officers and at least the 10 next most highly-compensated employees, or such higher number as the Secretary may determine is in the public interest with respect to any TARP recipient.

(IV)

For any financial institution that received financial assistance provided under the TARP equal to $500,000,000 or more, the prohibition shall apply to the senior executive officers and at least the 20 next most highly-compensated employees, or such higher number as the Secretary may determine is in the public interest with respect to any TARP recipient.

(iii)

The prohibition required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary or the designee of the Secretary.

(E)

A prohibition on any compensation plan that would encourage manipulation of the reported earnings of such TARP recipient to enhance the compensation of any of its employees.

(F)

A requirement for the establishment of a Board Compensation Committee that meets the requirements of subsection (c).

(4)

Certification of compliance

The chief executive officer and chief financial officer (or the equivalents thereof) of each TARP recipient shall provide a written certification of compliance by the TARP recipient with the requirements of this section—

(A)

in the case of a TARP recipient, the securities of which are publicly traded, to the Securities and Exchange Commission, together with annual filings required under the securities laws; and

(B)

in the case of a TARP recipient that is not a publicly traded company, to the Secretary.

(c)

Board Compensation Committee

(1)

Establishment of Board required

(2)

Meetings

(3)

Compliance by non-SEC registrants

(d)

Limitation on luxury expenditures

The board of directors of any TARP recipient shall have in place a company-wide policy regarding excessive or luxury expenditures, as identified by the Secretary, which may include excessive expenditures on—

(1)

entertainment or events;

(2)

office and facility renovations;

(3)

aviation or other transportation services; or

(4)

other activities or events that are not reasonable expenditures for staff development, reasonable performance incentives, or other similar measures conducted in the normal course of the business operations of the TARP recipient.

(e)

Shareholder approval of executive compensation

(1)

Annual shareholder approval of executive compensation

(2)

Nonbinding vote

(3)

Deadline for rulemaking

(f)

Review of prior payments to executives

(1)

In general

(2)

Negotiations for reimbursement

(g)

No impediment to withdrawal by TARP recipients

(h)

Regulations

(Pub. L. 110–343, div. A, title I, § 111, Oct. 3, 2008, 122 Stat. 3776; Pub. L. 111–5, div. B, title VII, § 7001, Feb. 17, 2009, 123 Stat. 516; Pub. L. 111–22, div. A, title IV, § 403, May 20, 2009, 123 Stat. 1658.)

cite as: 12 USC 5221