[House Report 111-71]
[From the U.S. Government Publishing Office]


111th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     111-71

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   PROVIDING FOR CONSIDERATION OF THE BILL (H.R. 1664) 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

                                _______
                                

   March 31, 2009.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

  Mr. Perlmutter, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 306]

    The Committee on Rules, having had under consideration 
House Resolution 306, by a nonrecord vote, report the same to 
the House with the recommendation that the resolution be 
adopted.

                SUMMARY OF PROVISIONS OF THE RESOLUTION

    The resolution provides for consideration of H.R. 1664, 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, under a structured rule. The rule 
provides one hour of general debate equally divided and 
controlled by the chair and ranking minority member of the 
Committee on Financial Services. The rule waives all points of 
order against consideration of the bill except clauses 9 and 10 
of rule XXI. The rule provides that the amendment in the nature 
of a substitute recommended by the Committee on Financial 
Services now printed in the bill shall be considered as an 
original bill for the purpose of amendment and shall be 
considered as read. The rule waives all points of order against 
the amendment in the nature of a substitute except for clause 
10 of rule XXI. This waiver does not affect the point of order 
available under clause 9 of rule XXI (regarding earmark 
disclosure).
    The rule makes in order only those amendments printed in 
this report. The amendments made in order may be offered only 
in the order printed in this report, may be offered only by a 
Member designated in this report, shall be considered as read, 
shall be debatable for the time specified in this report 
equally divided and controlled by the proponent and an 
opponent, shall not be subject to amendment, and shall not be 
subject to a demand for a division of the question in the House 
or in the Committee of the Whole. All points of order against 
the amendments except for clauses 9 and 10 of rule XXI are 
waived. The rule provides one motion to recommit with or 
without instructions.

                         EXPLANATION OF WAIVERS

    The waiver of all points of order against consideration of 
the bill (except for clauses 9 and 10 of rule XXI) includes a 
waiver of clause 4(a) of rule XIII, requiring a three-day 
layover of the committee report. Although the rule waives all 
points of order against the amendment in the nature of a 
substitute (except clause 10 of rule XXI), the Committee is not 
aware of any points of order. The waiver of all points of order 
is prophylactic.

               SUMMARY OF AMENDMENTS TO BE MADE IN ORDER

    (Summaries derived from information provided by sponsors)
    1. Frank (MA) Would provide further clarification that an 
institution does not become subject to the limitations on 
compensation in this bill as a result of doing business with an 
institution that has received a direct capital investment under 
either the TARP or HERA. Would exempt severance pay from 
coverage if the payment is made in the ordinary course to an 
employee who has been with the institution at least 5 years 
prior to dismissal, as long as that payment is not greater than 
the employee's annual salary or $250,000. Would require the 
compensation data that an institution must report annually to 
the Treasury to include contributions made for the benefit of 
an employee's immediate family members. Would create a 
Commission on Executive Compensation to study the executive 
compensation system for recipients of direct capital 
investments under the TARP and make recommendations for 
legislative and regulatory action. (20 minutes)
    2. Cardoza (CA) Would allow the Treasury Secretary to 
exempt financial institutions receiving TARP funds under a 
certain threshold. (10 minutes)
    3. Meeks, Gregory (NY) Would exempt from compensation 
standards any institutions that receive TARP funding or payment 
agreements entered into before the enactment of this bill. (10 
minutes)
    4. Bean (IL)/McMahon (NY) Would allow institutions that 
enter into a payment schedule with Treasury on terms set by 
Treasury to no longer be subject to the bonus and compensation 
restrictions created by the Act. If an institution defaults on 
its payment schedule, any bonuses and compensation that exceeds 
the regulations promulgated in accordance to the Act would be 
subject to clawback. (10 minutes)
    5. Bilirakis (FL) Would clarify that an institution that is 
not a TARP recipient will not be subject to the requirements of 
the bill as a result of doing business with a TARP recipient. 
(10 minutes)
    6. DeFazio (OR) Would amend the Emergency Economic 
Stabilization Act of 2008 to make the shareholder vote on 
executive compensation packages binding upon the board of 
directors. (10 minutes)
    7. Dahlkemper (PA) Would clarify the definition of 
executive compensation to include payments made before, during 
and after employment, and would make explicit that the 
definition of compensation considered under the standards to be 
prepared by the Secretary to include payment of money, 
transfers of property or provision of services. (10 minutes)

                 TEXT OF AMENDMENTS TO BE MADE IN ORDER

1. An Amendment To Be Offered by Representative Frank of Massachusetts, 
               or His Designee, Debatable for 20 Minutes

  In subsection (e)(1) of the matter proposed to be inserted by 
section 1(a) of the bill, in the matter following subparagraph 
(B), strike ``nothing in this paragraph'' and all that follows 
through ``under the TARP'' and insert ``an institution shall 
not become subject to the requirements of this paragraph as a 
result of doing business with a recipient of a direct capital 
investment under the TARP or under the amendments made by the 
Housing and Economic Recovery Act of 2008''.

  In subsection (e) of the matter proposed to be inserted by 
section 1(a) of the bill, redesignate paragraph (3) as 
paragraph (4) and insert after paragraph (2) the following:

          ``(3) Clarification relating to severance pay.--For 
        purposes of this subsection, a compensation payment or 
        compensation payment arrangement shall not include a 
        severance payment paid by an employer in the ordinary 
        course of business to an employee who has been employed 
        by the employer for a minimum of 5 years upon dismissal 
        of that employee, unless such severance payment is in 
        an amount greater than the annual salary of such 
        employee or $250,000.''.

  In the matter proposed to be inserted by section 1(a) of the 
bill, in subsection (e)(4)(B) (as redesignated by the previous 
amendment), insert before the period the following: ``or for 
the benefit of that person's immediate family members''.

  At the end of the bill, insert the following new section:

SEC. 2. EXECUTIVE COMPENSATION COMMISSION.

  Section 111 of the Emergency Economic Stabilization Act of 
2008 (12 U.S.C. 5221), as amended by section 1, is further 
amended by adding at the end the following new subsection:
  ``(j) Executive Compensation Commission.--
          ``(1) Establishment.--There is hereby established a 
        commission to be known as the `Commission on Executive 
        Compensation' (hereinafter in this subsection referred 
        to as the `Commission').
          ``(2) Duties.--
                  ``(A) Study required.--The Commission shall 
                conduct a study of the executive compensation 
                system for recipients of a direct capital 
                investment under the TARP. In conducting such 
                study, the Commission shall examine--
                          ``(i) how closely executive pay is 
                        currently linked to company 
                        performance;
                          ``(ii) how closely executive pay has 
                        been linked to company performance in 
                        the past;
                          ``(iii) how executive pay can be more 
                        closely linked to company performance 
                        in the future;
                          ``(iv) the factors influencing 
                        executive pay; and--
                          ``(v) how current executive pay 
                        incentives affect executive behavior.
                  ``(B) Consideration of proposals.--The 
                Commission shall consider, in addition to any 
                recommendations made by members of the 
                Commission or outside advisers, the effects of 
                implementing increased shareholder voice in 
                executive compensation.
          ``(3) Report.--
                  ``(A) In general.--Not later than 90 days 
                after the date on which all members of the 
                Commission have been appointed, the Commission 
                shall deliver a report to the President and to 
                the Congress containing--
                          ``(i) recommendations for legislative 
                        action;
                          ``(ii) recommendations for executive 
                        action, including actions taken by the 
                        Department of the Treasury or any other 
                        agency for which the Commission has 
                        recommendations; and
                          ``(iii) recommendations for voluntary 
                        actions to be taken by recipients of a 
                        direct capital investment under the 
                        TARP.
                  ``(B) Minority views.--The report required 
                under subparagraph (A) shall be accompanied by 
                any separate recommendations that members of 
                the Commission wish to make, but that were not 
                agreed upon by the Commission for purposes of 
                the report required under subparagraph (A). 
                Such separate recommendations must take the 
                form of a proposal for aligning executive pay 
                with the long-term health of the company.
          ``(4) Composition.--
                  ``(A) The Commission shall be composed of 9 
                members, appointed as follows:
                          ``(i) 1 member appointed by the 
                        Council of Economic Advisers.
                          ``(ii) 1 member appointed by the 
                        Speaker of the House of 
                        Representatives.
                          ``(iii) 1 member appointed by the 
                        Senate Majority Leader.
                          ``(iv) 1 member appointed by the 
                        House Minority Leader.
                          ``(v) 1 member appointed by the 
                        Senate Minority Leader.
                          ``(vi) 1 member appointed by the 
                        Chairman of the Financial Services 
                        Committee of the House of 
                        Representatives.
                          ``(vii) 1 member appointed by the 
                        Ranking Member of the Financial 
                        Services Committee of the House of 
                        Representatives.
                          ``(viii) 1 member appointed by the 
                        Chairman of the Banking, Housing, and 
                        Urban Affairs Committee of the Senate.
                          ``(ix) 1 member appointed by the 
                        Ranking Member of the Banking, Housing, 
                        and Urban Affairs Committee of the 
                        Senate.
                  ``(B) Each appointing entity shall name its 
                member within 21 days of the date of the 
                enactment of this subsection.
                  ``(C) Any vacancy in the Commission shall be 
                filled in the same manner as the original 
                appointment.
          ``(5) Activities.--
                  ``(A) The Chairman of the Financial Services 
                Committee of the House of Representatives shall 
                select one member to serve as the Chairman of 
                the Commission, and such Chairman will call to 
                order the first meeting of the Commission 
                within 10 business days after the date on which 
                all members of the Commission have been 
                appointed.
                  ``(B) The Commission shall meet at least once 
                every 30 days and may meet more frequently at 
                the discretion of the Chairman.
                  ``(C) The Commission shall solicit and 
                consider policy proposals from Members of 
                Congress, the financial sector, academia and 
                other fields as the Commission deems necessary.
                  ``(D) The Commission shall hold at least two 
                public hearings, and may hold more at the 
                discretion of the Chairman.
          ``(6) Actions by the commission.--A decision of a 
        majority of commissioners present at a meeting of the 
        Commission shall constitute the decision of the 
        Commission where the Commission is given discretion to 
        act, including but not limited to, recommendations to 
        be made in the report described in paragraph 3.
          ``(7) Staff.--The Chair may hire at his or her 
        discretion up to seven professional staff members.
          ``(8) Termination.--The Commission shall terminate 30 
        days after the date on which the Commission submits its 
        report to the President and the Congress under 
        paragraph 3.
          ``(9) Authorization of appropriations.--There are 
        authorized to be appropriated such sums as may be 
        necessary to carry out this subsection.
                              ----------                              


2. An Amendment To Be Offered by Representative Cardoza of California, 
               or His Designee, Debatable for 10 Minutes

  In subsection (e) of the matter proposed to be inserted by 
section 1(a), add at the end the following:
          ``(4) Community financial institution exemption.--
                  ``(A) In general.--The Secretary may exempt 
                community financial institutions from any of 
                the requirements of this subsection, when the 
                Secretary finds that such an exemption is 
                consistent with the purposes of this 
                subsection.
                  ``(B) Community financial institution 
                defined.--for the purposes of this paragraph, 
                the term `community financial institution' 
                means a financial institution that receives or 
                received a direct capital investment under the 
                Troubled Asset Relief Program under this title 
                of not more than $250,000,000.''.
                              ----------                              


 3. An Amendment To Be Offered by Representative Meeks of New York, or 
                 His Designee, Debatable for 10 Minutes

  In subsection (e)(1) of the matter proposed to be inserted by 
section 1(a)--
          (1) strike ``has received or receives a direct 
        capital investment under the Troubled Assets Relief 
        Program under this title'' and insert ``receives a 
        direct capital investment under the Troubled Assets 
        Relief Program under this title after the date of 
        enactment of this subsection''; and
          (2) strike ``any existing compensation arrangement'' 
        and insert ``any compensation arrangement other than a 
        compensation arrangement entered into prior to the date 
        of enactment of this subsection''.
                              ----------                              


 4. An Amendment To Be Offered by Representative Bean of Illinois, or 
                 Her Designee, Debatable for 10 Minutes

  In subsection (e) of the matter proposed to be inserted by 
section 1(a) of the bill, redesignate paragraph (3) as 
paragraph (4) and insert after paragraph (2) the following:
          ``(3) Conditional exemption.--
                  ``(A) Repayment agreement.--Paragraph (1) 
                shall not apply to a financial institution that 
                has entered into a comprehensive agreement with 
                the Secretary to repay the United States, in 
                accordance with a schedule and terms 
                established by the Secretary, all outstanding 
                amounts of any direct capital investment or 
                investments received by such institution under 
                this title.
                  ``(B) Default.--If the Secretary determines 
                that an institution that has entered into an 
                agreement as provided for in subparagraph (A) 
                has defaulted on such agreement, the Secretary 
                shall require that any compensation payments 
                made by such institution that would have been 
                subject to paragraph (1) if the institution had 
                not entered into such an agreement be 
                surrendered to the Treasury.''.
                              ----------                              


 5. An Amendment To Be Offered by Representative Bilirakis of Florida, 
               or His Designee, Debatable for 10 Minutes

    In subsection (e)(1) of the matter proposed to be inserted 
by section 1(a) of the bill, in the matter following 
subparagraph (B), strike ``Provided that'' and all that follows 
through ``under the TARP'' and insert ``An institution shall 
not become subject to the requirements of this paragraph as a 
result of doing business with a recipient of a direct capital 
investment under the TARP or under the amendments made by the 
Housing and Economic Recovery Act of 2008''.
                              ----------                              


 6. An Amendment To Be Offered by Representative DeFazio of Oregon, or 
                 His Designee, Debatable for 10 Minutes

    At the end of the bill insert the following:
    (c) Shareholder Approval of Executive Compensation.--
Subsection (f)(2) of section 111 of the Emergency Economic 
Stabilization Act of 2008 (12 U.S.C. 5221) is amended--
          (1) by striking ``shall not be binding'' and 
        inserting ``shall be binding''; and
          (2) by striking ``and may not be construed'' and all 
        that follows and inserting ``and any compensation 
        payment arrangement not approved by such a vote may not 
        be entered into by the TARP recipient.''.
                              ----------                              


     7. An Amendment To Be Offered by Representative Dahlkemper of 
        Pennsylvania, or Her Designee, Debatable for 10 Minutes

    In subsection (e)(1)(B), of the matter proposed to be 
inserted by section 1(a), insert after ``payment'' the 
following: ``, whether payable before employment, during 
employment, or after termination of employment,''.
    In subsection (e), of the matter proposed to be inserted by 
section 1(a), add at the end the following new paragraph:

          ``(4) Compensation considerations under the 
        standards.--In establishing standards under this 
        subsection, the Secretary shall consider as 
        compensation any transfer of property, payment of 
        money, or provision of services by the financial 
        institution that causes any increase in wealth on the 
        part of an executive or employee.''.

                                  
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