DESPITE EVOLVING RULES ON 

EXECUTIVE COMPENSATION,

SIGTARP SURVEY PROVIDES INSIGHTS 

ON COMPLIANCE

SIGTARP-09-003 

AUGUST 19, 2009 
 

SIGTARP 

Office of the Special Inspector General 

for the Troubled Asset Relief Program 

Special Inspector General for the Troubled Asset Relief Program 

Summary of Report: SIGTARP-09-003 

Why SIGTARP Did This Study 

The Troubled Asset Relief Program (“TARP”) 

was created by the Emergency Economic 

Stabilization Act of 2008 (“EESA”), which was 

enacted on October 3, 2008. TARP provided the 

Secretary of the Treasury with various 

authorities to restore the liquidity and stability of 

the United States financial system and to 

increase lending. The Act also placed restrictions 

on executive compensation for all TARP 

recipients. However, the American Recovery 

and Reinvestment Act of 2009 (“ARRA”) 

amended the original executive compensation 

requirements established under EESA. As of 

early July 2009, the Department of Treasury has 

disbursed about $361 billion of TARP assistance 

to over 650 cial institutions, many of which 

are subject to executive compensation 

restrictions. 

The Congress and the public frequently ask 

questions about compliance with executive 

compensation restrictions. Accordingly, 

in February 2009, SIGTARP sent survey letters 

to 364 financial and other institutions that had 

completed TARP funding agreements through 

January 2009. The survey instrument provided 

for open-ended responses. The goal was to elicit 

as much information as possible while allowing 

for different conditions at each institution. 

The review and analysis was confined to the 

survey responses-including supporting 

documentation- as provided, reported and 

certified by the TARP recipients. 

The objective of this report was to address the 

efforts of TARP recipients’ to comply with 

executive compensation restrictions in place at 

the time of our survey and plans to comply with 

subsequently enacted changes in requirements. 

This report is set against the background of the 

evolving rules on executive compensation 

requirements for TARP recipients. Our work 

was performed in accordance with generally 

accepted government auditing standards. 

What SIGTARP Recommends 

SIGTARP makes no recommendations in this 

report. 

In commenting on a draft of this report, Treasury 

concurred with the report. 

August 19, 2009

DESPITE EVOLVING RULES ON EXECUTIVE

COMPENSATION, SIGTARP SURVEY PROVIDES INSIGHTS ON

COMPLIANCE

What SIGTARP Found 

This is the first of a series of SIGTARP audits on executive compensation. 

When SIGTARP conducted this survey, the requirements for executive 

compensation were still evolving. Shortly after SIGTARP distributed the survey, 

ARRA amended EESA’s executive compensation restrictions. When 

implemented by Treasury, the new restrictions would modify the original 

executive compensation requirements established under EESA. Neither EESA 

nor ARRA directly limit the annual base pay of senior executive officers; rather, 

executive compensation restrictions placed thus far on CPP recipients have more 

specifically targeted incentive compensation and severance payments. 

Given the timing of the survey, many of the responses reflected uncertainty and 

a wait-and-see attitude about the emerging guidelines and restrictions on 

executive compensation. Nevertheless, many respondents provided insights 

regarding their efforts to comply with the requirements as they understood them. 

Survey responses regarding compliance with EESA bonus and severance pay 

restrictions varied from simple statements of compliance to detailed answers 

about efforts to assess compensation practices relative to the restrictions. 

Although some recipients expressed frustration with changing compensation 

guidance and legislation, many respondents noted actions they were taking at the 

time of the survey based on known requirements and with the understanding that 

final guidelines were pending. These actions included taking steps to assess risks 

and procure expert compensation consultants.

Similarly, some recipients noted the changing nature of legislative requirements 

and a lack of clear and final implementing guidance but provided a forwardlooking perspective. For example, one institution reported that the “company 

was monitoring recent developments with respect to executive compensation 

limitations including the recent enactment of the ARRA. The company will take 

the steps necessary to comply with the 2009 Act, as the requirements are further 

defined by the issuance of implementing regulations by the Treasury.” 

Institutions also voiced concerns about future requirements for executive 

compensation—such as retroactive application—and uncertainty about future 

changes. Finally, other ongoing SIGTARP audit work has identified concerns 

about the potential for compensation restrictions to disadvantage some firms 

receiving TARP assistance in retaining key personnel. Several large firms stated 

that they have already lost a number of executives as a direct result of the 

executive compensation restrictions. 

The responses to this SIGTARP survey provide necessary context for examining 

the evolution of executive compensation requirements, adding clarity to what 

was required, and highlighting some relevant issues that could impact 

implementation of requirements going forward. As the executive compensation 

picture becomes clearer in the future, SIGTARP plans to conduct follow-up 

audits on this important topic to build on these initial findings. 

 

finan
Office of the special inspector general 

 For the Troubled Asset Relief Program 

1801 L Street, NW 

Washington, D.C. 20220 

 

Office of the special inspector general 

 For the Troubled Asset Relief Program 

1801 L Street, NW 

Washington, D.C. 20220 

 
Table of Contents 

Introduction 1

Insights on Executive Compensation from SIGTARP Survey 7 

 

Conclusions 13 

Management Comments and Audit Evaluation 13 

Appendices 

A. Scope and Methodology 14 

B. Survey Letter 16 

C. Summary of Treasury’s June 15, 2009 Interim Rule 

 on Executive Compensation 18 

D. Interim Final Rule Calendar 26 

E. Audit Team Members 27 

F. Management Comments 28 
1 

DESPITE EVOLVING RULES ON EXECUTIVE COMPENSATION ,

SIGTARP SURVEY PROVIDES INSIGHTS ON COMPLIANCE

SIGTARP REPORT 09-003 August 19, 2009 

Introduction 

The Emergency Economic Stabilization Act of 2008 (“EESA”),1 enacted on October 3, 2008, 

authorized the Secretary of the Treasury to establish the Troubled Asset Relief Program 

(“TARP”) to purchase troubled assets from financial institutions. As part of its implementation 

of EESA, Treasury has promulgated certain requirements with respect to executive compensation 

at the recipient organizations. Some of these limitations were explicitly stated in legislative 

requirements, and others were proposed pursuant to the authority granted to the Treasury under 

EESA. These requirements have evolved and changed over time; the latest requirements were set 

forth in a June 15, 2009, set of interim final regulations published by Treasury in the Federal 

Register. As of early July 2009, Treasury has disbursed about $361 billion of TARP assistance to 

more than 650 financial institutions using funds authorized under EESA. 

The Congress and the public frequently ask two questions about the investments made by 

Treasury: 

• What have program recipients done with the money they received from Treasury? 

• Have the recipients complied with the executive compensation requirements that were a 

condition of receiving the funds? 

To address these questions, beginning on February 5, 2009, SIGTARP sent survey letters to 364 

financial and other institutions that had completed TARP funding agreements through January 

31, 2009 (See Appendix B). This report addresses the efforts of TARP recipients to comply with 

the restrictions on executive compensation in place at the time of our survey and their plans to 

comply with subsequently enacted and promulgated requirements. 

Getting full information about compliance with requirements for executive compensation proved 

difficult for a number of reasons: 

• the evolving nature of those requirements 

• the lag time associated with meeting some of the requirements 

• the American Recovery and Reinvestment Act was passed after the survey was sent to 

TARP recipients 

 

1

 Public Law 110-343, October 3, 2008. 
2 

• the more recent regulations promulgated by Treasury after TARP recipients had 

responded to SIGTARP’s survey request 

Nevertheless, SIGTARP believes that the responses provide necessary context for examining the 

evolution of executive compensation requirements, add clarity to the nature of the requirements, 

and highlight some relevant issues that could impact implementation of requirements going 

forward. SIGTARP issued a separate report on the use of funds on July 20, 2009.2 

Background 

From the outset of TARP, all financial institutions directly participating in TARP and under an 

ongoing obligation to Treasury were expected to abide by the requirements for executive 

compensation set forth in EESA and applicable Treasury regulations and guidance. Since EESA 

was enacted, additional regulations, amendments, and notices on executive compensation have 

been issued. Figure 1 illustrates the changes in executive compensation restrictions set forth by 

Congress and Treasury over time. 

Figure 1: Timeline for TARP Executive Compensation Limitations 

Source: SIGTARP Analysis of TARP Executive Compensation Guidance 

Section 111 of EESA, as originally enacted, required all financial institutions that sell troubled 

assets to the Treasury under TARP to abide by certain rules on executive compensation intended 

to avoid unnecessary and excessive risks, to provide for recovery of bonus and incentive 

payments based on criteria later proven to be materially inaccurate, and impose restrictions on 

excessive departure pay (known as golden parachutes) to senior executive officers. On October 

20, 2008, Treasury issued an interim final rule implementing the EESA restrictions on executive 

compensation. This interim final rule established the original standards for executive 

compensation for institutions participating in the Capital Purchase Program (“CPP”). The 

primary provisions are described below: 

 

2

 SIGTARP-09-001, “Survey Demonstrates Banks Can Provide Meaningful Information On Their Use of TARP 

Funds,” July 20, 2009. 

EESA Legislation 

Enacted 

Treasury Issues Capital 

Purchase Program Interim 

Final Rule 

Treasury Announces 

Proposed Amendment to 

October 2009 Interim 

Final Rule

Treasury Announces 

Proposed Guidelines 

SIGTARP Survey 

Mailed 

Treasury Issues 

Interim Final Rule to 

Implement ARRA 

ARRA Legislation 
• Excessive risk: Incentive compensation for senior executive officers was required not to 

encourage unnecessary and excessive risks that threaten the value of the financial 

institution. The financial institution's compensation committee, or a committee acting in a 

similar capacity, was required to review the incentive compensation arrangements with 

its senior risk officers within 90 days of Treasury’s purchase of preferred shares under the 

CPP. 

• Tax deductibility: The institution could not deduct more than $500,000 of executive 

compensation for each senior executive officer based on limitations set forth under 

Section 162(m)(5) of the Internal Revenue Code. 

• Clawback: SEO bonus and incentive compensations was required to be subject to a

clawback—the recovery of any bonus or incentive compensation paid to a senior 

executive officer if statements of earnings, gains, or other criteria are later proven to be 

materially inaccurate. 

• Golden parachute: Golden parachute payments were prohibited for senior executive 

officers. A golden parachute was defined as “any payment in the nature of compensation 

to (or for the benefit of) a senior executive officer made on account of an applicable 

severance from employment to the extent the aggregate present value of such payment 

equals or exceeds an amount equal to three times the senior executive officer’s base 

amount.” 

These restrictions covered the institution’s senior executive officers (“SEO”s), which were 

defined as the Chief Executive Officer, Chief Financial Officer, and the three most highly 

compensated executive officers. The restrictions were to apply for as long as Treasury held an 

equity or debt position in the institution. 

On January 16, 2009, Treasury announced proposed amendments to its October 2008 CPP 

interim final rule to include requirements for reporting and recordkeeping with respect to the 

executive compensation standards for CPP recipients. The January announcement stated that 

these regulations would be effective on the date they were published in the Federal Register. 

However, due to the transition of administrations and the resulting hold on all new regulatory 

actions, these amendments were never published in the Federal Register; therefore, they were 

never put into force. 

 

Additional uncertainties about executive compensation restrictions flowed from proposed 

guidance announced on February 4, 2009, and differing requirements enacted later that month. 

On February 4, 2009, Treasury proposed restrictions that, among other things, generally sought 

to limit going forward the total annual compensation of senior executives of TARP recipients to 

$500,000, in addition to grants of long-term restricted stock and long-term incentive awards (or, 

in the case of TARP recipients that did not receive exceptional assistance, to have this limit 

waived through a shareholder vote on compensation)—and to increase the number of senior 

officers covered by the clawback and golden parachute provisions. Treasury also proposed that 

the guidelines would not apply retroactively to existing investments or to previously announced 

programs, but would apply to newly announced programs. Before the February 2009 guidance 

could be fully implemented, however, the American Recovery and Reinvestment Act (“ARRA”) 

3 
4 

was signed into law on February 17, 2009. ARRA amended EESA requirements related to 

executive compensation, including these provisions: 

• specifying what constitutes a golden parachute payment and the executives subject to a 

prohibition on such payments 

• adding additional specificity to employees subject to clawback provisions 

• limiting incentive compensation to one-third of selected employees’ total compensation 

(the number of employees affected depends on the amount of TARP funding received) 

• specifying categories of employees who would be subject to incentive compensation 

restrictions, depending on the amount of TARP assistance received by the institution 

• requiring institutions receiving TARP assistance to provide for a non-binding shareholder 

vote on executive compensation packages, the so-called, “Say on Pay” requirement 

 

ARRA required Treasury to issue implementing regulations. 

On June 10, 2009, Treasury announced its latest interim final rule to implement the executive 

compensation requirements outlined in ARRA. The interim final rule stated that the rule was 

effective on June 15, 2009, the date published in the Federal Register, and would be finalized 

after consideration of comments received during a 60-day comment period. According to 

Treasury officials, the latest Interim Final Rule attempts to harmonize requirements in ARRA 

and prior guidance form Treasury as well as make the following changes to previous interim 

rules or proposed guidance: 

• The annual compensation limit of $500,000 proposed for recipients participating in new 

TARP programs proposed by Treasury in February 2009 (excluding long-term restricted 

stock) was not retained. 

• Bonus payments to senior executive officers3

 and to a specified number of the most 

highly compensated employees of TARP recipients were restricted to stock in an amount 

not to exceed one-third of total compensation.4 

• The golden parachute prohibition will now extend beyond SEOs to include the next five 

most highly compensated individuals, and the definition of a golden parachute includes 

any and all payments made at the time of departure or change in control for services not 

performed. 

• The clawback requirement applies to the SEOs and the next 20 most highly compensated 

individuals. 

Although the above provisions generally apply to all TARP programs, the interim final rule 

established separate requirements for institutions receiving exceptional assistance under the 

 

3

 A “named executive officer” of a TARP recipient is defined under Federal securities law to generally include the 

principal executive officer (“PEO”), principal financial officer (“PFO”), and the next three most highly compensated 

employees. 

4

 The rule defines “most highly compensated” employees by reference to total annual compensation as calculated 

under federal securities regulations, in order to most accurately capture the amounts earned by these executives each 

year. The number of most highly compensated employees covered by the limit depends on the amount of financial 

assistance the company has received. 
5 

Targeted Investment Program (“TIP”), Systemically Significant Failing Institutions Program 

(“SSFI”), and the Automotive Industry Financing Program (“AIFP”), as noted below.5

 For 

additional information on Treasury’s June 15, 2009, Interim Rule on Executive Compensation 

and the role of the Special Master for TARP Executive Compensation, see Appendix C. 

The rule also created an Office of the Special Master for TARP Executive Compensation within 

Treasury. For the TARP recipients receiving exceptional assistance,6

 the Special Master will 

review compensation payments and structures for the SEOs and the next 20 most highly 

compensated employees at each institution. In addition, he will be reviewing compensation 

structures for executives officers and the next 75 most highly compensated employees (and the 

executive officers) of TARP recipients receiving exceptional assistance. According to Treasury, 

this is to ensure that compensation is structured to protect taxpayer interests and to promote longterm shareholder value. 

 

Furthermore, the Special Master is granted a “look-back” authority to review, for all TARP 

recipients, certain payments between the closing date of the contract with the TARP recipient 

and February 17, 2009 (the date of ARRA’s enactment). The reviews will cover all bonuses, 

retention awards, and other compensation paid to the 5 SEOs and the next 20 most highly paid 

employees. This look back assessment will be conducted to determine whether any such 

payments were inconsistent with the purposes of TARP or were otherwise contrary to the public 

interest. The Special Master may then seek to negotiate for appropriate reimbursements. 

The Special Master is also authorized to provide advisory opinions regarding the application of 

the interim final rule to particular payments and compensation plans. These opinions may be 

issued at the request of the participating TARP recipient or by the Special Master at his own 

initiative. 

Objectives 

SIGTARP distributed its survey to TARP recipients to obtain information regarding specific 

plans and the status of implementation of those plans to address executive compensation 

requirements associated with the receipt of TARP funding. This report principally addresses the 

efforts of banks to comply with restrictions on executive compensation that were in place at the 

time of our survey. Subsequent to distributing our survey, ARRA was enacted. Many 

respondents to our survey commented on the executive compensation restrictions in the new 

legislation; therefore, we also are reporting on recipients’ plans to comply with these 

requirements. This report is set against the background of the evolving rules on executive 

compensation for TARP recipients. 

 

5

The restrictions do not apply to those institutions that have repaid their TARP funds while Treasury still holds 

warrants to purchase the common stock of those institutions.

6

 The seven companies are American International Group, Bank of America, Citigroup, General Motors, General 

Motors Acceptance Corporation, Chrysler Financial, and Chrysler. 
Scope 

SIGTARP sent the survey to 364 financial and other institutions that had completed TARP 

funding agreements through January 31, 2009. Because the objective of this report is broad, the 

open-ended survey elicited different levels of detail. Many banks were concerned about 

business-sensitive information and requested that we keep their responses confidential. 

Accordingly, pursuant to our legal obligations, SIGTARP is not attributing any results or 

comments in this report to a specific institution. However, SIGTARP is in the process of 

evaluating recipients’ claims of confidentiality; when we complete that process we will post 

information provided by the respondents to the maximum extent permitted by law, allowing for 

any necessary redactions. 

This report is limited to assessing reported compliance of recipients with EESA regulations as 

promulgated on October 14, 2008, and as they were proposed to be amended on January 16, 

2009. We confined our review and analysis to the survey responses as reported and certified by 

the TARP recipients. SIGTARP did not review any additional information or documentation 

beyond that provided by respondents. Also, many TARP recipients responded within 90 days of 

receiving TARP funds; therefore, they were not yet required to have implemented all executive 

compensation requirements at the time of their response. 

• For a more complete discussion of the audit scope and methodology, see Appendix A. 

• For the letter sent to recipients of TARP funds through January 31, 2009, see Appendix 

B. 

• For additional information on Treasury’s June 15, 12009 Interim Rules on Executive 

Compensation and the role of the Special Master, see Appendix C. 

• For the timeframe to implement the interim final rules issued on June 15, 2009, see 

Appendix D. 

• For a list of audit team members, see Appendix E. 

• For comments from the Department of the Treasury, see Appendix F. 

6 
Insights on Executive Compensation Compliance 

from SIGTARP Survey 

When SIGTARP conducted this survey, the requirements for executive compensation were still 

evolving. Nevertheless, many respondents provided significant insights regarding their efforts to 

comply with the requirements as they understood them. Currently, neither EESA nor ARRA 

directly limits the annual base pay of senior executive officers; rather, the restrictions on 

executive compensation that have been placed thus far on TARP recipients have more 

specifically targeted incentive compensation and severance payments. Survey responses 

regarding compliance with EESA bonus and severance pay restrictions varied from simple 

statements of compliance to detailed answers regarding efforts to assess compensation practices 

relative to the restrictions. Although some recipients expressed frustration with changing 

compensation guidance and legislation, many respondents noted actions—such as the 

procurement of expert compensation consultants—that they were taking at the time of the survey 

based on known requirements with the understanding that final guidelines were pending. 

Overall Pay Not Capped by Treasury’s Latest Interim Final 

Rule 

In considering executive compensation restrictions, it is important to understand prior and 

current restrictions on employees’ base pay relative to other compensation. In its most recent 

executive compensation guidance, Treasury has shifted its emphasis on capping base salaries. 

Initially, EESA did not specifically limit overall compensation, but institutions could not deduct, 

for income tax purposes, executive compensation in excess of $500,000 for each senior 

executive officer. As recently amended through the ARRA legislation, EESA limits bonus 

payments to senior executive officers and to other highly compensated employees of TARP 

recipients to one-third of total compensation, but does not otherwise specifically set a pay cap. 

At the same time, however, the $500,000 figure still has some relevance; the latest guidance 

stipulates that the Special Master will automatically approve proposed compensation to 

employees of TARP recipients receiving exceptional assistance as long as the employee’s total 

annual compensation does not exceed $500,000, with any additional compensation paid in longterm restricted stock. In addition, TARP recipients have agreed in their contracts with the 

Treasury not to deduct compensation in excess of $500,000 for executives subject to the 

deduction limitation in Section 162 (m) of the Code. Appendix D shows the timeframes that 

recipients of exceptional TARP assistance must meet to comply with the new regulations. 

In a press statement announcing the new compensation guidelines on June 10, 2009, the 

Secretary of the Treasury also announced plans to seek greater compensation reforms through 

legislation and the regulatory process. For example, he announced that legislation would be 

proposed to give the Securities and Exchange Commission (“SEC”) the authority to require 

companies to give shareholders a non-binding vote on executive compensation. He also 

emphasized the importance of efforts being taken by the Chairman of the Board of Governors of 

the Federal Reserve System and the other bank supervisors to lay out broad standards on 

7 
8 

compensation that will be more fully integrated into the supervisory process.7 Such actions 

would apply uniformly to regulated entities rather than being limited to institutions receiving 

TARP assistance. 

Survey Responses Address Compliance with Key Executive 

Compensation Restrictions 

Treasury’s approach to limit executive compensation of TARP participants has largely targeted 

restrictions on incentive compensation and severance payments. Three key restrictions have 

remained that were addressed in our survey: 

• compensation tied to excessive risk taking 

• bonuses based on materially inaccurate financial statements 

• payments made to executives upon severance from the company 

At the time of the SIGTARP survey, these initial EESA provisions were the most current 

guidelines placing executive compensation restrictions on TARP recipients. Based on selfreported data, CPP recipients appear to have been making a concerted effort to comply with 

EESA’s restrictions on executive compensation, as noted below. 

Risk Assessments Required of Bonus Compensation Plans 

Because of the 90-day grace period after the date of their certification of compliance, only 52 

institutions were required to have performed a risk assessment of SEO incentive compensation 

arrangements by the time they responded to the SIGTARP survey. All of these institutions 

reported having performed such a risk assessment as had approximately 60 percent of the 

remaining 312 institutions for which the grace period had not yet expired. 

Respondents provided varying degrees of detail in their risk assessments, ranging from providing 

their risk assessment reports to simple statements of compliance. The following are examples of 

responses that specifically addressed the risk assessment provision: 

• “An executive compensation risk assessment was performed by [the Bank’s] senior 

risk officers within 90 days of Treasury’s purchase of securities. Based on the 

materials reviewed and discussions with subject matter experts, [the Bank’s] senior 

risk officers concluded that the executive compensation and incentive program does 

not encourage the SEOs to take unnecessary and excessive risks.” 

• “[T]he Compensation Committee reviewed the SEO incentive compensation 

arrangements with the company’s senior risk officers...to ensure that the SEO 

incentive compensation arrangements do not encourage SEOs to take unnecessary 

and excessive risk that threaten the value of the institution. The Committee met to 

review certain reports and: (1) Discuss with the bank’s senior risk officers the long-

 

7

 Treasury, “FINANCIAL REGULAORY REFORM: A New Foundation Rebuilding Financial Supervision and 

Regulation,” June 17, 2009. 
9 

term and short-term risks that the bank faces that could threaten the value of the 

company; (2) Identify the features of the company’s incentive compensation 

arrangements that could lead SEOs to take such risks; and (3) Limit any such feature 

in order to ensure that the SEOs are not encouraged to take risks that are unnecessary 

or excessive.” 

Some recipients provided documentation to support their responses, such as Board minutes or 

compensation consultant reports.8

 However, most respondents did not provide any 

documentation to support their responses, other than the attestation in the letter of response. 

Clawback Provision Required 

Nearly 80 percent of the institutions reported compliance with EESA provisions regarding 

clawbacks.9

 The remaining 20 percent did not specifically address compliance with the 

clawback provision or report overall compliance with executive compensation restrictions. 

The following examples are representative of the responses: 

• “With respect to the clawback provisions, the SEOs of [the Bank] have executed 

agreements...which allow [the Bank] to recover or clawback any bonus or incentive 

compensation paid during the TARP period from SEOs if such bonus or incentive 

compensation was awarded based on materially inaccurate financial statements or 

other performance metric criteria. 

• “[E]ach SEO also signed a letter agreement whereby [the Bank] and each of the 

SEOs...agreed that any bonus and incentive compensation paid to a SEO is subject to 

recovery or clawback by [the Bank] during the time the preferred stock remains 

outstanding if the payments were based on materially inaccurate financial statements 

or any other materially inaccurate performance metric criteria....” 

Severance Pay Limitations on Golden Parachutes 

Nearly 83 percent of survey respondents reported compliance with the golden parachute 

restriction.10 The remaining 17 percent did not specifically address compliance with the golden 

parachute provision or report overall compliance with executive compensation restrictions. 

About 55 percent of the recipients reported enacting policies through the execution of letter 

agreements, compensation agreements, amendments or waivers with the senior executive 

officers, or by changing general compensation policies. These are some examples of how 

institutions reported their compliance with these provisions: 

 

8

 The SIGTARP survey requested that a recipient’s “response should include copies of pertinent supporting 

documentation (financial or otherwise) to support your response.” The survey did not define “pertinent” or ask for 

specific documentation. 

9

 Institutions were considered to have reported compliance with the clawback provision if they stated that they were 

in overall compliance with EESA regulations, or if they specifically stated they were in compliance with the 

clawback provision. 288 institutions reported compliance as defined above. 

10 Institutions were considered to have reported compliance with the golden parachute provision if they stated that 

they were in overall compliance with EESA regulations, or if they specifically stated that they were in compliance 

with the golden parachute provision. 296 institutions reported compliance as defined above. 
10 

• “[M]anagement of [the Bank] asked five Senior Executive Officers (SEO) of the 

holding company and subsidiary Bank to execute a letter agreement [supporting 

documentation provided] agreeing to: no golden parachute payments....Each SEO 

agreed to become legally bound by the letter.” 

• “The company is prohibiting any golden parachute payment to you during any ‘CPP 

Covered Period’. A ‘CPP Covered Period’ is any period during which (a) you are a 

senior executive officer and (b) Treasury holds an equity or debt position acquired 

from the Company in the CPP.”11

Almost one-fifth of the recipients provided documents to support their statements of compliance, 

such as agreements and waivers. 

Recipients Reported an Intent To Comply with Future 

Requirements 

Though not specifically asked by SIGTARP, nearly half of TARP recipients voluntarily reported 

that they intended to comply with the new requirements for executive compensation specified in 

the ARRA legislation. For example, one institution reported that: 

• “[The] company is monitoring recent developments with respect to executive 

compensation limitations including the recent enactment of the ARRA. The company 

will take the steps necessary to comply with the 2009 Act, as its requirements are 

further defined by the issuance of implementing regulations by the Treasury.” 

Nonetheless, some institutions voiced concerns about retroactive application, uncertainty about 

future changes, and about the executive compensation requirements enacted during the time of 

the survey. 

Many recipients were aware that ARRA would place additional restrictions on executive 

compensation and stated that they intended to comply with the new restrictions once Treasury 

issued the required guidance. One institution made this comment: 

• “We are currently in the process, with the assistance of counsel, of reviewing the 

ARRA to determine whether further modifications to our executive compensation 

arrangements or other actions will be required pending adoption of regulations and 

guidance by Treasury. In light of the provisions of ARRA, the Company’s 

Compensation Committee will recommend, and our Board of Directors will adopt, a 

TARP Compensation Compliance Policy that addresses each of the requirements 

contained in EESA, ARRA, and the related Treasury guidelines.” 

Forty institutions (about 11 percent) reported that they used outside consultants to monitor and 

implement new developments on executive compensation restrictions. Most of these firms had 

received less than $100 million in CPP funds. Several banks stated that they employed 

 

11 This statement is a portion of an SEO letter agreement. 
consultants to assist in compliance, design, and ongoing monitoring activities with regard to 

executive compensation requirements. One institution stated that it hired an independent 

compensation consultant to: 

• “assist [the Bank] in reviewing and assessing [the Bank’s] overall compensation 

programs to comply with the CPP executive compensation rules as well as to monitor 

and advise [the Bank] on additional regulations or changes required in light of 

evolving executive compensation requirements in U.S. Treasury guidance and in the 

[ARRA].” 

Another bank used an outside consultant to determine independently whether the structure of the 

SEO’s compensation package could lead to excessive risk taking. The consultant concluded that 

it did not. 

Some Concerns over New ARRA Requirements 

ARRA was enacted after SIGTARP distributed the surveys but before TARP recipients 

submitted their responses. During this time, some institutions expressed uncertainty about the 

guidance for compliance with TARP executive compensation requirements and voiced concerns 

about the changes in executive compliance guidelines. These are some of the concerns raised by 

survey respondents regarding the new requirements under ARRA: 

• Unprecedented scope of the requirements: “As your office is aware, the new 

executive compensation limitations of [EESA] and [ARRA] are without precedent in 

Federal law, are barely five months old but have nevertheless changed significantly 

within the short period...Nevertheless, we are working diligently to determine 

precisely how these new executive compensation [limitations] apply to [the Bank].” 

• Retroactive nature of the requirements: “I’m sure that you can relate to our 

frustration in consummating our TARP transaction [in January 2009] with what we 

thought were set standards and restrictions that we agreed to—only to have new 

restrictions seemingly applied and changed almost daily.” 

• Fears about possible future changes: “The fact that Congress in enacting ARRA 

endorsed much (but not all) of the Treasury Guidelines brings into question whether 

the other restrictions in the Treasury Guidelines will be enacted.” 

Furthermore, some respondents stated that they may return CPP funds because the new 

limitations would or may lead to a competitive disadvantage and hamper their ability to retain 

top performers. One such recipient responded that it was “currently exploring the option of 

returning this funding given the changes that are contemplated in [ARRA], along with the 

demonstrated negative perception associated with financial institutions that have received TARP 

funding.” Additionally, senior officials at two major banks that SIGTARP staff interviewed as 

part of other ongoing work stated that they have lost employees to foreign and domestic 

competitors who are not under CPP compensation restrictions. One of those banks stated that it 

had lost five top executives to other firms as a direct result of compensation restrictions. Further, 

11 
other banks reported that they were having trouble recruiting new employees or were 

experiencing higher levels of early retirements. 

12 
Conclusions 

Since EESA was enacted on October 3, 2008, the legislation and implementing guidance on 

executive compensation for TARP recipients have been in flux. Nevertheless, most CPP 

recipients report that they have made a concerted effort to comply with executive compensation 

limitations. Moreover, many institutions reported that they intend to comply with the additional 

restrictions on executive compensation enacted under ARRA. Nonetheless, some recipients 

voiced concerns about the new restrictions; in particular, they noted a need for further Treasury 

guidance or regulations to implement ARRA executive compensation limitations. 

As part of regulatory reform, the Administration recently made three proposals: 

• that regulators issue standards and guidelines to better align executive compensation 

practices with long‐term shareholder value and to prevent compensation practices from 

providing incentives that could threaten the safety and soundness of supervised 

institutions, 

• that the SEC be given the authority to require companies to allow shareholders to vote on 

executive compensation packages to help ensure that compensation packages are closely 

aligned with the interests of shareholders, and 

• that the SEC be directed to promulgate independence standards for members of 

compensation committees and for consultants and advisors to compensation committees, 

to ensure that compensation committee are independent in fact not just in name. 

These proposals could provide broad reform of executive compensation practices for all financial 

institutions, not just for those receiving TARP assistance. 

Management Comments and Audit Evaluation 

In commenting on a draft of this report, the Assistant Secretary for Financial Stability concurred 

with the report. The Office of Financial Stability also provided technical comments which 

SIGTARP incorporated as appropriate. A copy of Treasury’s letter is reprinted in Appendix F of 

this report.

13 
Appendix A—Scope and Methodology 

We performed the audit under authority of Public Law 110-343, as amended, which also 

incorporates the duties and responsibilities of inspectors general under the Inspector General Act 

of 1978, as amended. This audit reports on compliance with executive compensation 

requirements by 364 institutions that completed TARP funding agreements through January 31, 

2009. Our objective was to assess the efforts of TARP recipients to comply with executive 

compensation restrictions that were in place at the time of our survey. Subsequent to distributing 

our survey, the ARRA legislation was enacted. Many respondents to our survey commented on 

the executive compensation restrictions in the new legislation; therefore, we also are reporting on 

banks plans to comply with these requirements. 

SIGTARP conducted this performance audit from February to July 2009, in accordance with 

generally accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. Within the limitations noted below, we 

believe that the evidence obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives. 

To elicit in-depth information with greater richness of context, we developed a narrative survey 

letter that provided for open-ended responses. We chose this approach because the institutions 

are so diverse in terms of asset size, institution type, and institution-specific economic factors. 

Regarding executive compensation, we asked each recipient to provide a narrative response that 

outlined specific plans and the status of implementation of those plans for addressing executive 

compensation requirements associated with the funding. We also asked recipients to include: 

• any assessments made of loan risks and their relationship to executive compensation 

• how limitations on executive compensation will be implemented in line with Treasury 

guidelines 

• whether any such limitations may be offset by other changes to other, longer-term or 

deferred forms of executive compensation 

Furthermore, we encouraged recipients to include in their responses copies of pertinent 

supporting documentation to support their responses. We also used some information regarding 

the impact of executive compensation restrictions on retention of key personnel from interviews 

of the chief executive officers of major banks based on other ongoing audit work. 

We contracted with Concentrance Consulting Group, Inc. (“Concentrance”), a Section 8(a) 

women-owned small business, to help us review and analyze the responses we received. We 

interacted and worked with the Concentrance team at least weekly from April through July 2009 

to help develop the analysis and produce the report. We took a number of steps to ensure the 

consistency of our analysis. We developed a checklist for analysts to review each survey 

response. If an analyst had questions related to a survey response, another analyst reviewed the 

response; then we discussed these cases collectively until we reached consensus agreement in 

14 
interpreting the response relative to other responses. In addition, a quality control team that was 

not involved in the analytical process reviewed all of the data entry. 

Limitations on Data 

SIGTARP’s review and analysis was confined to the survey responses and supporting 

documentation as provided, reported, and certified by the TARP recipients. We did not 

independently verify the data reported by the recipients. However, we did ask that each recipient 

certify the accuracy of its responses under the penalty of law. 

15 
Appendix B—Survey Letter 

16 
17 
 

Appendix C––Summary of Treasury’s June 15, 

2009 Interim Final Rule on Executive 

Compensation

On February 17, 2009, the executive compensation provisions contained in Section 111 of EESA 

were amended by Section 7001 of the American Recovery and Reinvestment Act of 2009 

(“ARRA”), which required that Treasury promulgate regulations to implement the ARRA 

amendments. On June 10, 2009, Treasury released its Interim Final Rule on TARP Standards for 

Compensation and Corporate Governance (the “Rule”), which implements EESA as amended by 

ARRA. The Rule is an “Interim Final Rule.” It took effect when it was published in the Federal 

Register on June 15, 2009, but there is a 60-day public comment period after which it may be 

changed. The Rule “implement[s] ARRA provisions, consolidates all of the executivecompensation-related provisions that are specifically directed at TARP recipients into a single 

rule (superseding all prior rules and guidance), and utilizes the discretion granted to the 

[Treasury] Secretary under ARRA to adopt additional standards, some of which are adapted from 

principles set forth” in guidance previously provided by Treasury in February 2009. The Rule 

applies to all TARP recipients, defined in the Rule to include “any entity that has received or 

holds a commitment to receive financial assistance” provided under TARP or any entity that 

owns 50 percent or more, or is 50 percent or more owned by, such an entity. In general, the 

executive compensation restrictions in the Rule apply only as long as the TARP recipient has an 

“obligation” to Treasury; an “obligation” does not include Treasury holding warrants to purchase 

common stock of the TARP recipient. 

In general, the Rule defines financial assistance as “any funds or fund commitment provided 

through the purchase of troubled assets” by Treasury through a direct financial transaction 

between Treasury and the TARP participant. For example, CPP participants that directly sell 

preferred stock to Treasury generally have received financial assistance under the Rule. 

However, those institutions that post collateral to and receive loans from TALF are considered to 

have not “received financial assistance provided under TARP” and therefore are not subject to 

the Rule. Table 1 shows a breakdown of how the compensation and governance standards set 

forth in the Rule apply to all TARP programs. 

18 
Table 1: Interim Rule Executive Compensation Restrictions as They Apply to 

TARP Programs 

TARP Program Applicable Notes 

All participating institutions are subject to the 

executive compensation restrictions. Capital Purchase Program X 

Capital Assistance 

Program X All participating institutions are subject to the executive compensation restrictions. 

Systemically Significant 

Failing Institutions X Restrictions apply to AIG. 

Targeted Investment 

Program X Restrictions apply to Citigroup and Bank of America. 

Asset Guarantee 

Program X Restrictions apply to Citigroup. 

Restrictions apply to GM, GMAC, Chrysler, and 

Chrysler Financial. 

Automotive Industry 

Financing program X 

Auto Supplier Support 

Program X Executive compensation restrictions apply only to auto companies, not automobile purchasers 

Auto Warranty 

Commitment Program X Executive compensation restrictions apply only to auto companies, not automobile purchasers. 

Term Asset-Backed 

Securities Loan Facility Program is not applicable to TALF participants. 

Would apply only if there is a majority owner of the 

Public Private Investment Fund (“PPIF”). Because 

PPIF will be structured so that no entity can invest in 

more than 9.9% of the fund, executive compensation 

restrictions will not apply. 

Public Private Investment 

Program 

Program is exempted by statute.a Making Homes Affordable 

Unlocking Credit for Small 

Business X Restrictions apply only to the institution selling the eligible assets to Treasury. 

Notes: 

a The Making Home Affordable program is exempted by statute from the executive compensation and corporate 

governance standards set forth in the ARRA amendments. See Section 1002 of the American Recovery and 

Reinvestment Act of 2009, P.L. 111-5, 2/13/2009. 

Source: Treasury

Compensation Limits 

The Rule establishes certain compensation requirements with which all TARP recipients must 

comply. The number of employees to whom the requirements apply varies; in general, however, 

the compensation limitations in the Rule apply to the TARP recipient’s senior executive officers 

(SEOs) and most highly compensated employees, determined by reference to annual 

compensation. The Rule defines annual compensation as the dollar value for total compensation 

as determined under applicable federal securities laws. 

Different types of compensation are addressed differently in the Rule. For example, the number 

of employees for whom bonus payments are limited is based on the amount of TARP funding 

received by the institution. The Rule did not include the proposed annual compensation limit for 

new TARP programs of $500,000 (excluding long-term restricted stock) proposed by Treasury in 

February 2009. Table 2 shows the specific compensation requirements set forth in the Rule and 

how each requirement applies to TARP recipients. 

19 
Table 2: Compensation Limit Requirements 

Requirement Definition How the Requirement Is 

Applied 

To Whom the 

Requirement 

Applies 

Bonus Payments Bonus, retention award, or 

incentives 

Bonus payments are prohibited– 

except for payments made in 

restricted stock (which cannot 

have a value greater than 1/3 of 

the employee’s total 

compensation and must be 

forfeitable if the employee does 

not continue providing services 

for the TARP recipient for at least 

two years from the date of grant). 

Employees identified in 

Table 3 (based on the 

level of TARP 

assistance) 

Commissions Payment earned by an 

employee consistent with 

a program in existence for 

that type of employee as 

of February 17, 2009. If a 

substantial portion of the 

services provided by the 

employee consists of the 

direct sale of a product or 

services to an unrelated 

customer 

Commissions meeting the 

definition in the Rule are exempt 

from the limitations on bonuses, 

retention awards, and incentive 

compensation; however, fees 

earned in connection with a 

specified transaction (e.g. an 

initial public offering) are not 

commissions for purposes of the 

Rule. 

Employees identified in 

Table 3 (based on the 

level of TARP 

assistance) 

Excessive Risk Unnecessary risk taking 

encouraged by employee 

compensation plans 

Review of employee 

compensation plans by the 

compensation committee, a 

narrative explanation of the 

committee’s analysis with 

respect to risk, and certification 

that the compensation committee 

has completed the review. 

All TARP recipients 

Clawback Recovery by the company 

of amounts paid to an 

employee based on 

materially inaccurate 

performance criteria 

All bonuses, retention awards, 

and incentive compensation 

must be subject to clawback if 

the payments were based on 

materially inaccurate 

performance criteria. The TARP 

recipient must actually exercise 

its clawback rights unless it can 

demonstrate that it would be 

unreasonable to do so. 

SEOs and the next 20 

most highly 

compensated 

employees 

Golden Parachute Any payment to an 

employee for departure for 

any reason, or any 

payment due to a change 

in control 

Prohibits any and all golden 

parachute payments to the 

applicable employees made at 

the time of departure or upon a 

change in control. 

SEOs and the next 5 

most highly 

compensated 

employees 

Perquisite Personal benefit, including 

a privilege or profit 

incidental to regular salary 

or wages 

Must disclose the amount, 

nature, and justification for any 

perquisite valued at more than 

$25,000. 

Employees identified in 

Table 3 (based on the 

level of TARP 

assistance). 

Source: Treasury 

20 
Office of the Special Master for TARP Executive Compensation 

Under the Rule, Treasury has created a new Office of the Special Master for TARP Executive 

Compensation (“Special Master”) which will be responsible for the review and analysis of 

executive compensation by TARP recipients. The Special Master’s scope is limited to executive 

compensation and corporate governance issues under the Rule for TARP recipients. The Special 

Master has the authority to accomplish these objectives: 

• Review compensation payments and plans at TARP recipients that have received 

“exceptional assistance” (for the SEOs and 20 next most highly compensated 

employees) and compensation structures (for the 100 most highly compensated 

employees and any executive officers). 

• Review bonuses, retention awards, and other compensation paid before February 17, 

2009, by TARP recipients and, negotiate reimbursements when appropriate. 

• Provide advisory opinions with respect to the application of the Rule and whether 

compensation payments and plans are consistent with EESA, TARP, and the public 

interest. 

The Rule requires that the Special Master use specific principles when reviewing compensation 

payments and plans at TARP recipients: 

• Risk: The compensation structure should avoid incentives for employees to take 

unnecessary or excessive risks that could threaten the value of the TARP recipient, 

including incentives that reward employees for short-term or temporary increases in 

value, performance, or similar measures that may not ultimately be reflected by an 

increase in the long-term value of the TARP recipient. 

• Taxpayer Return: The compensation structure, and amount payable where applicable, 

should reflect the need for the TARP recipient to remain a competitive enterprise, to 

retain and recruit talented employees who will contribute to the TARP recipient’s 

future success, and ultimately to be able to repay TARP obligations. 

• Appropriate Allocation: The compensation structure should appropriately allocate the 

components of compensation (for example, salary, executive pensions, bonus 

payments, and incentives). The appropriate allocation may be different for different 

positions and for different employees; in general, however, for executives or other 

senior-level positions, a significant portion of the overall compensation should be 

long-term compensation that aligns the interest of the employee with the interests of 

shareholders and taxpayers. 

• Performance-based Compensation: An appropriate portion of the compensation 

should be performance-based over a relevant performance period. Performance-based 

compensation should be determined through tailored metrics that encompass 

individual performance and/or the performance of the TARP recipient or a relevant 

21 
business unit, taking into consideration specific business objectives. 

• Comparable Structures and Payments: The compensation structure and pay should be 

consistent with pay for those in similar positions at similar entities. 

• Employee Contribution to TARP Recipient Value: The compensation structure 

should reflect the current or prospective contributions of an employee to the value of 

the TARP recipient, taking into account multiple factors. 

Exceptional Assistance Authority 

Under the Rule, the Special Master has specific duties regarding payments and compensation 

plans for executives of TARP recipients that have received exceptional assistance. For 

companies receiving exceptional assistance, the Special Master will review compensation 

payments for the SEOs and the 20 next most highly compensated employees at each institution. 

In addition, he will be reviewing compensation structures for the 100 most highly compensated 

employees (and the executive officers) of a TARP recipient receiving exceptional assistance. 

According to Treasury, this is to ensure that compensation is fair and structured, to protect 

taxpayer interests, and to promote long-term shareholder value. 

“Look-Back” Authority 

The Special Master will also be conducting a “look-back” review of certain payments at all 

TARP recipients made prior to February 17, 2009 (the date of ARRA’s enactment). The review 

will cover all bonuses, retention awards, and other compensation paid to the 5 SEOs and the next 

20 next most highly paid employees. This review will encompass approximately 436 institutions 

and 10,900 individuals. If the Special Master determines that payments were made 

inappropriately or contrary to the public interest, he will have the authority to negotiate for 

appropriate reimbursement to the federal government. 

The American Recovery and Reinvestment Act of 2009—Expanded 

Provisions 

The Rule expanded three ARRA provisions: review by the Board Compensation Committee of 

all employee compensation plans, the “Say on Pay” requirement, and enhanced luxury 

expenditure requirements. 

Board Compensation Committee 

Under the Rule, each TARP recipient must establish a Board Compensation Committee (the 

“Committee”). The Committee must include independent directors from the company’s board 

and will convene for the purpose of reviewing all employee compensation plans. An exception to 

this requirement is made for TARP recipients that are not registered under the Securities 

Exchange Act of 1934 and have received $25 million or less in TARP assistance. These 

institutions may have their boards of directors carry out the duties of the Board Compensation 

Committee. 

The Committee is required to meet at least semiannually to review with senior risk officers the 

proposed compensation plans of all employees and ensure that the TARP recipient is not 

22 
unnecessarily exposed to risks. In addition, the Committee will evaluate SEO compensation 

plans to ensure that the plans do not encourage SEOs to take unnecessary and excessive risks that 

could threaten the value of the TARP recipient. The Rule requires that the Committee submit an 

annual report to Treasury providing a narrative description of how it limited any features of 

compensation plans that would encourage SEOs to take unnecessary and excessive risks and any 

features of compensation plans that could encourage the manipulation of reported earnings to 

enhance the compensation of an employee. 

“Say on Pay” 

The Rule provides a provision for a non-binding vote by shareholders on executive 

compensation, sometimes referred to as “Say on Pay.” This provision requires all TARP 

recipients to permit an annual non-binding vote by shareholders on executive compensation as 

required by SEC regulations. 

Luxury Expenditures 

The Rule also addresses corporate luxury expenses. The Rule states that the board of directors of 

any institution receiving TARP funds must have a company-wide policy to define and prevent 

excessive or luxury expenditures on entertainment or events, office and facility renovations, 

aviation or other transportation services, and other activities or events that are not reasonable 

expenditures for staff development, reasonable performance incentives, and other activities 

conducted in the normal course of business operations. 

The company must file this policy with Treasury and post it to the company website by the later 

of: 

• 90 days after the closing of the transaction between Treasury and the TARP recipient 

OR 

• 90 days following publication of the Rule 

 The Rule also requires that the PEO and PFO of each institution provide certification that any 

expenditures needing approval by a senior executive or the board of directors have been properly 

approved. 

Additional Compensation and Governance Standards 

According to Treasury, the Rule provides additional requirements that will further protect 

shareholder value and increase transparency by all TARP recipients. In addition to the 

compensation and corporate governance standards explicitly required by Congress, the Rule 

includes three additional requirements: a prohibition on tax gross-ups, a requirement that TARP 

recipients provide additional disclosure of perquisites, and a requirement that TARP recipients 

provide disclosure with respect to compensation consultants. 

Tax Gross-up 

A tax gross-up is typically a specific payment to cover taxes due on certain compensation. 

According to Treasury, studies have shown that these payments cost the companies that provide 

23 
them far more than the benefits the payments provide to executives. The Rule prohibits TARP 

recipients from providing any tax gross-up payments to the SEO and to the next 20 highestcompensated employees. 

Perquisites 

In addition to disclosure requirements applicable to perquisites that are already enforced by the 

SEC, the Rule subjects TARP recipients to more stringent requirements. SEC rules require 

disclosure of perquisites given to the top five executive officers. The Rule expands this 

requirement to include perquisites over $25,000 given to any employees of TARP recipients 

subject to the bonus limitations described in Table 3. Additionally, firms must provide a 

narrative description of, and justification for, these benefits. 

Table 3: Employees Subject to Bonus Limitations, by Amount of TARP Funding 

Amount of TARP Funding Applicable Employees 

< $25,000,000 most highly compensated employee 

≥ $25,000,000 < $250,000,000 at least the 5 most highly compensated employees 

≥ $250,000,000 < $500,000,000 SEOs and 10 next most highly compensated employees 

≥ $500,000,000 SEOs and 20 next most highly compensated employees 

Note: The ARRA amendments provide that, with respect to financial institutions that have received more 

than $25 million in TARP assistance, the Secretary may apply the bonus limitations to a higher number of 

employees if the Secretary determines that this is in the public interest. 

Source: Treasury

Compensation Consultants 

Many firms hire compensation consultants to determine appropriate pay levels for top 

executives. According to Treasury, these consultants may have influence over the setting of 

compensation, and it may be helpful for shareholders to know whether TARP recipients have 

hired an outside consultant. Therefore, the Rule requires all TARP recipients to provide annually 

to the Treasury and its primary federal regulator a narrative description of the services provided 

by such consultants and a description of any benchmarking analysis performed by the 

consultants. 

Certifications 

As recommended by SIGTARP, the Rule provides certification and reporting requirements on 

the compensation and corporate governance guidelines that apply to TARP recipients. TARP 

recipients must provide a list of the SEOs and the 20 most highly compensated employees for the 

current fiscal year. Under the Rule, this determination is based on their prior fiscal year’s total 

annual compensation. Each certification must also provide a statement by the officer certifying 

that they “understand that a knowing and willful false or fraudulent statement made in 

connection with the certification may be punished by fine, imprisonment, or both.” Table 4 

24 
describes the reporting and certification requirements and the frequency with which the 

institution must provide the certifications. In addition to the requirements in Table 4, those 

TARP recipients classified as receiving exceptional assistance must certify to Treasury that the 

Special Master has approved their compensation payments and structures as required by the 

Rule. 

Table 4: Executive Compensation Reporting and Certification Requirements 

Compliance 

Category 

Actions Requiring Certification Certification Frequency 

Board 

Compensation 

Committee 

TARP recipient has created a Board 

Compensation Committee that meets the 

requirements of the Rule. 

• Later of 90 days after the 

closing of the transaction or 

90 days after publication of 

the Rule 

Compensation 

Plans Excessive 

Risk 

The Committee has evaluated SEO 

compensation plans and has identified and 

limited features of plants that could lead to 

unnecessary risks. The Committee has also 

reviewed employee compensation plans for 

features that could encourage the manipulation 

of reported earnings. 

• Evaluate every 6 months

• 90 days after the end of each 

fiscal year—must submit 

narrative description and 

certification

Bonus Payments TARP recipient has limited bonus payments to 

applicable employees in accordance with 

Section 111 of EESA and guidance thereunder. 

• 90 days after the end of each 

fiscal year

Luxury 

Expenditures 

TARP recipient has established an excessive or 

luxury expenditures policy and has posted it to 

the company web-site, and its employees have 

complied with the policy. 

• Later of 90 days after the 

closing of the transaction or 

90 days after publication of 

the Rule 

• 90 days after the end of each 

fiscal year 

Say on Pay TARP recipient has permitted non-binding 

shareholder resolution on executive 

compensation (publicly traded TARP recipients 

only) in accordance with applicable SEC 

regulations. 

• 90 days after the end of each 

fiscal year 

Compensation 

Consultants 

TARP recipient has disclosed whether an 

executive compensation consultant was hired 

and a description of services provided. 

• 90 days after the end of each 

fiscal year 

Perquisite TARP recipient has disclosed the amount, 

nature, and justification for offering any 

perquisites greater than $25,000 to each of its 

employees subject to bonus limitations. 

• 90 days after the end of each 

fiscal year 

Clawback TARP recipient has required that all bonus 

payments are subject to recovery if the 

payments were based on materially inaccurate 

performance metrics. 

• 90 days after the end of each 

fiscal year 

Source: Treasury 

25 
26 

Appendix D––Interim Final Rule Calendar 

Timeframe Action 

June 15, 2009 Interim Final Rule published in the Federal Register. 

August 14, 2009 Deadline for initial requests by TARP recipients receiving 

exceptional assistance to the Special Master on SEO and the next 

20 most highly compensated employees structures and payments. 

September 14, 2009, or Establish independent Compensation Committee. 

90 days after closing Establish, publish on company web-site, and provide to Treasury 

the excessive and luxury expense policy. 

120 days after Interim Final 

Rule published Deadline for initial requests to Special Master on compensation 

structure for executive officers and 100 most highly compensated 

employees not covered in August 14 submission. 

 

 

90 days after end of Principal executive officer and the principal financial officer 

fiscal year certifications due (ongoing). 

 

120 days after end of Compensation Committee certifications due to Treasury and 

fiscal year the company’s primary regulatory agency, including perquisites 

and compensation consultant review (ongoing). 

 
Appendix E—Audit Team Members 

This report was prepared and the review was conducted under the direction of Barry Holman, 

Audit Director, Office of the Special Inspector General for the Troubled Asset Relief Program. 

Other key SIGTARP staff included Michael Kennedy, James Shafer, Anne Blank, Trevor 

Rudolph, Amanda Seese, and Kamruz Zaman. The Concentrance staff members who supported 

SIGTARP in the audit and report development include: Karmen Carr, Alex Kangelaris, Darius 

Grayson, Patricia Taylor, Christopher Laughlin, Matthew Herman, Yusuf Makhkamov, and 

Mandy Ho. 

27 
Appendix F––Management Comments 

28 
SIGTARP Hotline 

If you are aware of fraud, waste, abuse, mismanagement, or misrepresentations affiliated with the 

Troubled Asset Relief Program, please contact the SIGTARP Hotline. 

By Online Form: www.SIGTARP.gov By Phone: Call toll free: (877) SIG-2009 

By Fax: (202) 622-4559 

By Mail: Hotline: Office of the Special Inspector General

for The Troubled Asset Relief Program

1801 L Street, NW 

Washington, D.C. 20220

Press Inquiries 

If you have any inquiries, contact our Press Office: 

Kristine Belisle 

Communications Director 

Kris.Belisle@do.treas.gov

202-927-8940 

Legislative Affairs 

For Hill inquiries, contact our Legislative Affairs Office: 

Lori Hayman 

Legislative Affairs Director 

Lori.Hayman@do.treas.gov

202-927-8941 

Obtaining Copies of Testimony and Reports 

To obtain copies of testimony and reports, please log on to our website at www.sigtarp.gov.

29