The House of Representatives has approved a bill that would repeal a provision in the American Recovery and Reinvestment Act that exempted certain bonuses at companies receiving federal bailout money from tough executive pay regulations.
The measure, which the House approved Wednesday, April 1, on a 247-171 vote, would affect the payment of retention bonuses such as those paid to some employees of American International Group Inc.’s Financial Products Corp. unit.
The ARRA contained a provision that exempted bonuses that had been promised in employment contracts signed on or before February 11 of this year. The House action voids that provision.
The measure, H.R. 1664, would prohibit a company receiving money from the government under the Troubled Asset Relief Program and some other programs from paying any executive or employee any compensation that is “unreasonable or excessive,” as defined in standards established by the Treasury secretary, and from paying any bonus or other supplemental payment that is not directly based on performance-based standards set by the secretary.
“Given the legislative process and the administration’s desire to get this bill done before the recess to speed funds into the economy, Congress made a mistake,” House Financial Services Committee Chairman Barney Frank, D-Massachusetts, said in a statement. “We have, fortunately, a process for correcting mistakes, which is subsequent legislation. We have now acted very promptly, and if this bill becomes law then the mistake will have had no effect.” The measure now goes to the Senate for its approval.
Filed by Mark A. Hofmann of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
