WASHINGTON Legislation that would ban bonuses for top executives at every bank or company receiving taxpayer money from the Treasury Department's $700 billion bailout fund was proposed on Wednesday by a senior Democratic lawmaker.
Sen. Christopher Dodd of Connecticut, chairman of the Senate Banking Committee, said his proposal would affect all recipients of money from the Troubled Asset Relief Program (TARP), both past and future. The measure will be attached to the nearly $900 billion economic stimulus package that the Senate is now debating.
Earlier on Wednesday, President Barack Obama set a $500,000 cap on executive pay and imposed other restrictions on companies that receive TARP money going forward. The new rules are not retroactive.
But Dodd said his legislation would restrict pay at all TARP recipients, and give the government the power to "claw back" any bonus already paid to an executive based on false information.
"There is absolutely no reason why hard-working American taxpayers should be financing, directly or indirectly, excessive compensation for corporate executives whose decisions, in many cases, have crippled their firms and weakened the broader economy," Dodd said in a statement.
Dodd's amendment complements legislative language already introduced to cap compensation at $400,000 for chief executives of companies that receive taxpayer aid. That amendment was offered by Democrat Claire McCaskill of Missouri and would be voted on as early as Wednesday evening.
Specifically, Dodd's amendment would take the following actions involving companies that have received TARP money:
* Ban bonuses for the 25 most highly-paid employees.
* Require each to include on its annual proxy statement a "say on pay" proposal allowing shareholders to vote on the company's executive compensation program.
* Require the Treasury Department to review bonus awards already paid to determine if any were "excessive" and to seek reimbursement if so.
* Give the government the power to claw back any bonus paid to an executive based on reported earnings or other criteria later found to be materially inaccurate.
* Require each board of directors' compensation committee to be composed only of independent directors.
* Require each board of directors to ban luxury expenditures such as private jets.
* Prohibit compensation plans with incentives for employees to take unnecessary and excessive risks.