TARP Executive Compensation Rulings Report Issued

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis.

The Office of the Special Inspector General for the Troubled Asset Relief Program has released its evaluation of the process designed by the Office of the Special Master for TARP Executive Compensation (OSM) to set pay packages and OSM's decisions on compensation for the top 25 employees at the companies that received exceptional assistance under TARP. Under this evaluation, SIGTARP assessed the criteria used by OSM to evaluate and make determinations on each company's executive compensation and whether OSM consistently applied criteria to all seven companies.

SIGTARP found that the Special Master could not effectively rein in excessive compensation at the seven companies because he was under the constraint that his most important goal was to get the companies to repay TARP. Although he generally limited cash compensation and made some reductions in pay, the Special Master still approved total compensation packages in the millions.

In the report, SIGTARP recommends that the OSM: substantiate each exception to the $500,000 pay limit that is requested and whether the requests demonstrate or fail to demonstrate “good cause;” better document its use of market data in its calculations; and develop more robust policies, procedures, or guidelines to help ensure that its pay determination process and its decisions are evenhanded.