Tuesday, March 31, 2009
While lots of folks are scrambling around looking for contract-law defenses to retention payments such as those given employees at failed AIG, Congress is looking at resolving the issue by introducing a new player: force majeure. The Pay for Performance Act of 2009 would amend the Emergency Economic Stabilization Act of 2008 (which authorized the Troubled Assets Relief Program), to retroactively ban payments of non-performance-related bonuses and "excessive cmpensation" for firms that receive TARP payments. The rules govern not just executives, but all employees at such firms. Here's the key language:
PROHIBITION: No financial institution that has received or receives a capital investment under [TARP] or with respect to the Federal National Mortgage Association, the Federal Home Loan Montage Corporation, or a Federal home loan bank . . . , 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 not directly based on performance-based measures set forth in standards established by the Secretary in accordance with paragraph (2).
The law directs the Treasury Secretary to develop standards for deciding whether compensation is excessive and to set up guidelines for what types of performance bonuses are reasonable.
That will take some help. Treasury is looking for data and mapping analyists, financial analysts, financial economists, and risk analyists. Pay goes as high as $133,000. Details here.