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HR Bill to Ban Bonuses for Bailout Companies

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[DISCUSSION DRAFT]
111TH CONGRESS 1ST SESSION

H. R. ll

To amend the executive compensation provisions of the Emergency Economic Stabilization Act of 2008 to prohibit unreasonable and excessive compensation and compensation not based on performance standards.

IN THE HOUSE OF REPRESENTATIVES
Ml. llllll introduced the following bill; which was referred to the Committee on llllllllllllll

A BILL
To amend the executive compensation provisions of the Emergency Economic Stabilization Act of 2008 to prohibit unreasonable and excessive compensation and compensation not based on performance standards. 1 Be it enacted by the Senate and House of Representa-

2 tives of the United States of America in Congress assembled, 3 4 5
SECTION 1. PROHIBITION ON EXECUTIVE COMPENSATION NOT BASED ON PERFORMANCE STANDARDS.

(a) PROHIBITION
ON

ON

EXECUTIVE COMPENSATION

6 NOT BASED

PERFORMANCE STANDARDS.—Section

7 111 of the Emergency Economic Stabilization Act of 2008
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2 1 (12 U.S.C. 5221) is amended by redesignating subsections 2 (e) through (h) as subsections (f) through (g), and insert3 ing after subsection (d) the following: 4 ‘‘(e) PROHIBITION
ON

EXECUTIVE COMPENSATION

5 NOT BASED ON PERFORMANCE STANDARDS.— 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ‘‘(1) PROHIBITION.—No financial institution that has received or receives a capital investment under this title, or with respect to the Federal National Mortgage Association, the Federal Home Loan Montage Corporation, or a Federal home loan bank, under the amendments made by section 1117 of the Housing and Economic Recovery Act of 2008, may, while that capital investment remains outstanding, make a compensation payment to any executive or employee under any pre-existing compensation arrangement, or enter into a new compensation payment arrangement, if such compensation payment or compensation payment arrangement— ‘‘(A) provides for compensation that is unreasonable or excessive, as defined in standards established by the Secretary in accordance with paragraph (2); or ‘‘(B) includes any bonus, retention payment, or other supplemental payment that is

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3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 not directly based on performance-based measures set forth in standards established by the Secretary in accordance with paragraph (2). ‘‘(2) STANDARDS.—Not later than 30 days after the date of enactment of this subsection, the Secretary shall establish the following: ‘‘(A) UNREASONABLE
AND EXCESSIVE

COMPENSATION

STANDARDS.—Standards

that

define ‘unreasonable or excessive’ for purposes of subparagraph (1)(A). ‘‘(B) PERFORMANCE-BASED
STANDARDS.—

Standards for performance-based measures that a financial institution must apply when determining whether it may provide a bonus or retention payment under paragraph (1)(B). Such performance measures shall include— ‘‘(I) the stability of the financial institution and its ability to repay or begin repaying the United States for any capital investment received under this title; ‘‘(ii) the performance of the individual executive or employee to whom the payment relates;

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4 1 2 3 4 5 6 7 ‘‘(iii) adherence by executives and employees to appropriate risk management requirements; and ‘‘(iv) other standards which provide greater accountability to shareholders and taxpayers.’’. (b) REVISION
TO

RULE

OF

CONSTRUCTION.—Section

8 111(b)(3)(D)(iii) of the Emergency Economic Stabiliza9 tion Act of 2008 (12 U.S.C. 5221(b)(3)(D)(iii)) is amend10 ed by inserting before the period the following: ‘‘, except 11 that no entity subject to subsection (e) may pay a bonus 12 to any of its employees or executives, without regard to 13 when the arrangement to pay such a bonus was entered 14 into.’’.

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Description: A new bill in Congress seeks to ban any and all bonuses for employees of companies that have received federal bailout money. This is the legislation currently in the House of Representatives.