Federal Stimulus Bill and TARP Mandate Additional Corporate Governance Requirements

After The American Recovery and Reinvestment Act was passed, the Say on Pay provisions for executive compensation received a great deal of coverage and scrutiny from the national media. Certainly, the Say on Pay provision for companies participating in the Troubled Assets Relief Program (TARP) is one of the most important corporate governance mandates in the Stimulus Bill; but it is far from the only concern for companies receiving government funding.

In addition to the Say on Pay provisions, which impose limits on executive compensation and require TARP recipients to “include in its annual proxy statement a nonbinding shareholder advisory vote on the company’s executive cash compensation program”, there are numerous other corporate governance concerns that have resulted from the government’s intervention in the financial crisis.

Among these corporate governance mandates for companies receiving government funding:

• Compensation Committee — companies receiving TARP funding must have a compensation committee composed entirely of independent directors;
• Retroactive Compensation Review — there is a required review of bonuses and retention awards already paid out before TARP funding was received;
• Repayment and Loan Modifications — the Treasury must accept repayment of TARP funds “without regard to whether the financial institution has replaced such funds from any other source or to any waiting period, and when such assistance is repaid, the Treasury must liquidate warrants associated with such assistance at the current market price.”
• Governance and Compensation Standards — as long as repayment obligations remain outstanding, TARP recipients are subject to corporate governance and compensations standards as they have been established by the language of the Stimulus Bill and Internal Revenue Code Section 162(m)(5).

For an in-depth breakdown of the various corporate governance mandates of the Stimulus Bill and TARP, follow the link used as reference for above information: Stimulus Bill Mandates Corporate Governance and Say on Pay

In addition, there is another tremendous resource for learning about these mandates and how to effectively deal with them. Deloitte Financial Advisory Services is hold a webcast titled “Oversight of the Fiscal Stimulus Bill: Transparency in a New Age” on Monday, March 23, at 2:00 PM ET.

Deloitte FAS CEO David Williams and his co-presenters will discuss:

• The importance of using the government funds in their intended manner, including details on the False Claims Act.
• The oversight board and their budget, including the responsibilities of investigators, attorneys and accountants.
• Guidelines for establishing whistleblower policies and educating employees.

Registration for the event is free and conducted online at the following link: Deloitte FAS Webcast on Fiscal Stimulus Bill Effects

(Note: Deloitte is not an official partner of Corporate Compliance Insights; but, as always, our goal is to provide you with as many possible resources for learning as we come across.)

Tags: corporate governance, Deloitte FAS, say on pay, stimulus bill, tarp