To amend title 11, United States Code, with respect to reform of executive compensation in corporate bankruptcies.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Fairness and Accountability in 
Reorganizations Act of 2006''.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) it is becoming more common for corporations that file 
        for bankruptcy protection under chapter 11 of title 11, United 
        States Code, to ask for great sacrifices from workers, 
        retirees, creditors, and former shareholders, while executives 
        provide themselves with generous bonuses and other forms of 
        lucrative compensation;
            (2) in the case of one company, an executive pay package 
        for key employees would have given executives and managers 
        $510,000,000 in compensation, while rank-and-file workers were 
        asked to take large wage cuts or forced to lose their jobs;
            (3) decency requires that the highly paid not seek to 
        enrich themselves on the backs of working families;
            (4) some bankruptcies involve companies with both foreign 
        and domestic operations, and judges need to be able to evaluate 
        the entirety of the operations when deciding whether sacrifices 
        by American workers and retirees are necessary; and
            (5) there is a need for fairness and accountability and a 
        new partnership for the future of the American workforce.

SEC. 3. EXECUTIVE COMPENSATION.

    Section 1129(a)(5) of title 11, United States Code, is amended--
            (1) in subparagraph (A)(ii), by striking ``and'' at the 
        end; and
            (2) in subparagraph (B), by striking the period at the end 
        and inserting the following:
 ``; and
            ``(C) the compensation disclosed pursuant to subparagraph 
        (B) has been approved by, or is subject to the approval of, the 
        court, as reasonable.''.

SEC. 4. LIMITATIONS ON COMPENSATION ENHANCEMENTS.

    Section 503(c) of title 11, United States Code, is amended--
            (1) in paragraph (1), by inserting ``, or for the payment 
        of a performance, incentive, or other bonus, or any other 
        compensation enhancement'' after ``remain with the debtor's 
        business''; and
            (2) by striking paragraph (3) and inserting the following:
            ``(3) other transfers or obligations, whether or not 
        outside of the ordinary course of business, to or for the 
        benefit of officers, managers, or consultants retained by the 
        debtor, before or after the filing of the petition, in the 
        absence of a finding by the court based upon evidence in the 
        record, and without deference to the debtor's request for such 
        payments, that such transfers or obligations are essential to 
        the survival of the business or (in the case of a liquidation 
        of some or all of the debtors' assets) essential to the orderly 
        liquidation and maximization of value of the assets of the 
        debtor, in either case, because of the essential nature of the 
        services provided, and then only to the extent that the court 
        finds those transfers or obligations are reasonable under the 
        circumstances of the case.''.

SEC. 5. TREATMENT OF FOREIGN AFFILIATES.

    (a) Collective Bargaining Agreements.--Section 1113(d) of title 11, 
United States Code, is amended by adding at the end the following:
    ``(4) Foreign Affiliates.--In determining whether the proposal 
required by subsection (b)(1) provides for those necessary 
modifications in employee benefits and protections that are necessary 
to permit the reorganization of the debtor and assures that all 
creditors, the debtor, and all affected parties are treated fairly and 
equitably, the court shall take into account the ongoing impact on the 
debtor of the debtor's relationship with all subsidiaries and 
affiliates, regardless of whether any such subsidiary or affiliate is 
domestic or nondomestic, or whether any such subsidiary or affiliate is 
a debtor entity.''.
    (b) Retiree Health Benefits.--Section 1114 of title 11, United 
States Code, is amended by adding at the end the following:
    ``(n) Retiree Health Benefits; Foreign Affiliates.--In determining 
whether the proposal required by subsection (f)(1)(A) provides for 
those necessary modifications in retiree benefits that are necessary to 
permit the reorganization of the debtor and assures that all creditors, 
the debtor, and all affected parties are treated fairly and equitably, 
the court shall take into account the ongoing impact on the debtor of 
the debtor's relationship with all subsidiaries and affiliates, 
regardless of whether any such subsidiary or affiliate is domestic or 
nondomestic, or whether any such subsidiary or affiliate is a debtor 
entity.''.

SEC. 6. EFFECTIVE DATE.

    Notwithstanding any other provision of law, the amendments made by 
this Act shall apply to any case under chapter 11 of title 11, United 
States Code, filed or pending on or after October 1, 2005.

Summary: Fairness and Accountability in Reorganizations Act of 2006 - Revises federal bankruptcy law to add to the conditions for court confirmation of a corporate reorganization plan that the compensation of an insider who will be employed or retained by the reorganized debtor has been approved by, or is subject to the approval of, the court, as reasonable. Prohibits the payment of a compensation enhancement in order to induce an insider of the debtor to remain with the debtor's business, unless the court finds that any transfers or obligations to or for the insider's benefit are essential to the survival of the business, or to the orderly liquidation and maximization of the value of the debtor's assets. Revises requirements for collective bargaining agreements and retiree health benefits to instruct the court to take into account the ongoing impact on the debtor of the debtor's relationship with all subsidiaries and affiliates, regardless of whether domestic or foreign, or whether any such subsidiary or affiliate is a debtor entity.