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Timeline: Accountability on Executive Compensation

APRIL 20, 2007 -- SHAREHOLDER VOTE ON EXECUTIVE COMPENSATION ACT (H.R. 1257; PASSED BY HOUSE)

As excessive executive compensation packages became the norm in corporate culture, the House passed the Executive Compensation Act to give shareholders an opportunity to express their approval or disapproval of public companies' executive pay. 
During this debate, Republicans offered a variety of amendments to water down this bill, and 70 percent of Republicans voted no on the bill. 
Passed House 269-134: (R 55-129; D 214-5).

OCTOBER 3, 2008 - EMERGENCY ECONOMIC STABILIZATION ACT (H.R. 1424; P.L. 110-343)

  • Taxpayer Protections, including giving taxpayers a share of the profits from appreciation in the value of assets purchased and requiring a plan to ensure taxpayers are repaid in full--with Wall Street responsible for any shortfalls
  • Oversight and Transparency, with an independent outside oversight board appointed by bipartisan leaders of Congress, GAO oversight and audits at Treasury, an independent Inspector General and transparency--requiring posting of transactions online
  • Tough Executive Compensation Restrictions
  • No multi-million dollar golden parachutes for top executives
  • No tax deduction for executive compensation over $500,000
  • Impose limits on CEO compensation that encourage unnecessary risk-taking
  • All of the stringent accountability and executive compensation provisions were offered by Democrats, but were scaled back by the Bush Administration.  

JANUARY 21, 2009 - TARP REFORM AND ACCOUNTABILITY ACT (H.R. 384; PASSED BY HOUSE)

  • Overhauls the Troubled Assets Relief Program to ensure that funds will be spent responsibly, forcing banks to report how government funds are being spent; calling on Treasury to spend $100 billion of TARP funds to help homeowners; and affirming that financial rescue funds should be used to benefit small financial institutions, consumer lending, auto companies, and municipalities.  These reforms were needed after the Bush Administration failed to implement the financial rescue plan with the intended accountability.
  • Across-the-board restrictions on compensation and bonuses for executives of firms participating in TARP.
    • For any new recipient of TARP funds (except small financial institutions), applies stringent executive compensation restrictions:
      • Requires Treasury to prohibit incentives that encourage excessive risk-taking,
      • Recovers bonuses paid to executives who promise gains that later turn out to be false or inaccurate,
      • Prohibits multi-million dollar golden parachutes (for all institutions receiving TARP assistance, not only those that sell $300 million or less in troubled assets to the federal government)
    • Extends the executive compensation requirements from the auto bill to any new receipt of TARP funds:
      • No bonuses for the 25 most highly paid employees at each company,
      • No compensation plan that would encourage manipulation of earnings to enhance compensation.
    • Treasury can apply these expanded executive compensation provisions retroactively for previous TARP assistance, and must apply them to new assistance, even if an institution has already received funding. 
  • Passed by a vote of 260-166; (D 242-10; R 18-156); 90 percent of Republicans opposed the bill.


FEBRUARY 4, 2009 -- PRESIDENT OBAMA'S NEW EXECUTIVE COMPENSATION LIMITS

  • After the House passed the financial rescue overhaul legislation, the Obama Administration issued new executive compensation limits.
  • Limit senior executives to $500,000 in total annual compensation.  Any additional pay for senior executives must be in restricted stock that vests when the government is repaid with interest.
  • Executive compensation structure and strategy must be fully disclosed and subject to a “Say on Pay” shareholder resolution.
  • Recover bonuses from the top 25 executives engaging in deceptive practices.
  • Expand ban on golden parachutes to top 10 senior executives--no golden parachutes worth more than 1 year's compensation for next 25 executives.

FEBRUARY 17, 2009 -- AMERICAN RECOVERY AND REINVESTMENT ACT (H.R. 1; P.L. 111-5)

  • Curbs multi-million dollar pay packages on Wall Street by imposing new limits on executive compensation at financial institutions and other corporations that have received or will receive funds through the Troubled Asset Relief Program (TARP).
  • Limits bonuses for executives to one-third of their annual pay and prohibits cash bonuses (bonuses must be in the form of restricted stock that could not be cashed out until the TARP money was repaid), for example.  These bonus restrictions apply to:
    • the top 25 executives and highly paid employees at companies receiving more than $500 million from the TARP;
    • the top 15 at companies receiving more than $250 million; and
    • the top five at companies receiving more than $25 million.
  • Restricts bonuses for executives that take excessive risks that threaten the company's value;
  • Prohibits any golden parachutes for up to the top 10 senior executives of a company;
  • Prohibits compensation practices that encourage earnings manipulation, or “cooking of the books”;
  • Institutes a company-wide policy on luxury expenses; and
  • Allows for shareholders to vote on approval of executive compensation packages. 
  • For compensation paid out wrongfully in the past, the Treasury must review past compensation paid to the top 25 employees of TARP recipients and seek to negotiate for reimbursements if those payments were contrary to the public interest or inconsistent with the purposes of the Act or the TARP.
  • Conference report passed the House by a vote of 246-183: R 0-176; D 246-7.  No Republicans voted for this measure.