Short title

This Act may be cited as the

Fairness and Accountability in Reorganizations Act of 2006

Findings

Congress finds that— (1)it is becoming more common for corporations that file for bankruptcy protection under chapter 11 of title 11, United States Code, to ask for great sacrifices from workers, retirees, creditors, and former shareholders, while executives provide themselves with generous bonuses and other forms of lucrative compensation; (2)in the case of one company, an executive pay package for key employees would have given executives and managers $510,000,000 in compensation, while rank-and-file workers were asked to take large wage cuts or forced to lose their jobs; (3)decency requires that the highly paid not seek to enrich themselves on the backs of working families; (4)some bankruptcies involve companies with both foreign and domestic operations, and judges need to be able to evaluate the entirety of the operations when deciding whether sacrifices by American workers and retirees are necessary; and (5)there is a need for fairness and accountability and a new partnership for the future of the American workforce.

Executive compensation

Section 1129(a)(5) of title 11, United States Code, is amended— (1)in subparagraph (A)(ii), by striking and at the end; and (2)in subparagraph (B), by striking the period at the end and inserting the following:

; and(C)the compensation disclosed pursuant to subparagraph (B) has been approved by, or is subject to the approval of, the court, as reasonable.

Limitations on compensation enhancements

Section 503(c) of title 11, United States Code, is amended— (1)in paragraph (1), by inserting , or for the payment of a performance, incentive, or other bonus, or any other compensation enhancement after remain with the debtor's business; and (2)by striking paragraph (3) and inserting the following:

(3)other transfers or obligations, whether or not outside of the ordinary course of business, to or for the benefit of officers, managers, or consultants retained by the debtor, before or after the filing of the petition, in the absence of a finding by the court based upon evidence in the record, and without deference to the debtor’s request for such payments, that such transfers or obligations are essential to the survival of the business or (in the case of a liquidation of some or all of the debtors’ assets) essential to the orderly liquidation and maximization of value of the assets of the debtor, in either case, because of the essential nature of the services provided, and then only to the extent that the court finds those transfers or obligations are reasonable under the circumstances of the case.

Treatment of foreign affiliates

(a)

Collective bargaining agreements

Section 1113(d) of title 11, United States Code, is amended by adding at the end the following:

(4)

Foreign affiliates

In determining whether the proposal required by subsection (b)(1) provides for those necessary modifications in employee benefits and protections that are necessary to permit the reorganization of the debtor and assures that all creditors, the debtor, and all affected parties are treated fairly and equitably, the court shall take into account the ongoing impact on the debtor of the debtor’s relationship with all subsidiaries and affiliates, regardless of whether any such subsidiary or affiliate is domestic or nondomestic, or whether any such subsidiary or affiliate is a debtor entity.

(b)

Retiree health benefits

Section 1114 of title 11, United States Code, is amended by adding at the end the following:

(n)

Retiree health benefits; foreign affiliates

In determining whether the proposal required by subsection (f)(1)(A) provides for those necessary modifications in retiree benefits that are necessary to permit the reorganization of the debtor and assures that all creditors, the debtor, and all affected parties are treated fairly and equitably, the court shall take into account the ongoing impact on the debtor of the debtor’s relationship with all subsidiaries and affiliates, regardless of whether any such subsidiary or affiliate is domestic or nondomestic, or whether any such subsidiary or affiliate is a debtor entity.

Effective Date

Notwithstanding any other provision of law, the amendments made by this Act shall apply to any case under chapter 11 of title 11, United States Code, filed or pending on or after October 1, 2005.