To amend the executive compensation provisions of the Emergency Economic Stabilization Act of 2008 to prohibit unreasonable and excessive compensation and compensation not based on performance standards.

SECTION 1. PROHIBITION ON CERTAIN COMPENSATION.

    (a) Prohibition on Certain Compensation Not Based on Performance 
Standards.--Section 111 of the Emergency Economic Stabilization Act of 
2008 (12 U.S.C. 5221) is amended by redesignating subsections (e) 
through (h) as subsections (f) through (i), and inserting after 
subsection (d) the following:
    ``(e) Prohibition on Certain Compensation Not Based on Performance 
Standards.--
            ``(1) Prohibition.--No financial institution that has 
        received or receives a direct capital investment under the 
        Troubled Assets Relief Program under this title, or with 
        respect to the Federal National Mortgage Association, the 
        Federal Home Loan Mortgage Corporation, or a Federal home loan 
        bank, under the amendments made by section 1117 of the Housing 
        and Economic Recovery Act of 2008, may, while that capital 
        investment remains outstanding, make a compensation payment, 
        other than a longevity bonus or a payment in the form of 
        restricted stock, to any executive or employee under any 
        existing compensation arrangement, or enter into a new 
        compensation payment arrangement, if such compensation payment 
        or compensation payment arrangement--
                    ``(A) provides for compensation that is 
                unreasonable or excessive, as defined in standards 
                established by the Secretary, in consultation with the 
                Chairperson of the Congressional Oversight Panel 
                established under section 125, in accordance with 
                paragraph (2); or
                    ``(B) includes any bonus or other supplemental 
                payment, whether payable before employment, during 
                employment, or after termination of employment, that is 
                not directly based on performance-based measures set 
                forth in standards established by the Secretary in 
                accordance with paragraph (2).
        An institution shall not become subject to the requirements of 
        this paragraph as a result of doing business with a recipient 
        of a direct capital investment under the TARP or under the 
        amendments made by the Housing and Economic Recovery Act of 
        2008.
            ``(2) Standards.--Not later than 30 days after the date of 
        enactment of this subsection, the Secretary, with the approval 
        of the agencies that are members of the Federal Financial 
        Institutions Examination Council, and in consultation with the 
        Chairperson of the Congressional Oversight Panel established 
        under section 125, shall establish the following:
                    ``(A) Unreasonable and excessive compensation 
                standards.--Standards that define `unreasonable or 
                excessive' for purposes of subparagraph (1)(A).
                    ``(B) Performance-based standards.--Standards for 
                performance-based measures that a financial institution 
                must apply when determining whether it may provide a 
                bonus or retention payment under paragraph (1)(B). Such 
                performance measures shall include--
                            ``(i) the stability of the financial 
                        institution and its ability to repay or begin 
                        repaying the United States for any capital 
                        investment received under this title;
                            ``(ii) the performance of the individual 
                        executive or employee to whom the payment 
                        relates;
                            ``(iii) adherence by executives and 
                        employees to appropriate risk management 
                        requirements; and
                            ``(iv) other standards which provide 
                        greater accountability to shareholders and 
                        taxpayers.
            ``(3) Clarification relating to severance pay.--For 
        purposes of this subsection, a compensation payment or 
        compensation payment arrangement shall not include a severance 
        payment paid by an employer in the ordinary course of business 
        to an employee who has been employed by the employer for a 
        minimum of 5 years upon dismissal of that employee, unless such 
        severance payment is in an amount greater than the annual 
        salary of such employee or $250,000.
            ``(4) Conditional exemption.--
                    ``(A) Repayment agreement.--Paragraph (1) shall not 
                apply to a financial institution that has entered into 
                a comprehensive agreement with the Secretary to repay 
                the United States, in accordance with a schedule and 
                terms established by the Secretary, all outstanding 
                amounts of any direct capital investment or investments 
                received by such institution under this title.
                    ``(B) Default.--If the Secretary determines that an 
                institution that has entered into an agreement as 
                provided for in subparagraph (A) has defaulted on such 
                agreement, the Secretary shall require that any 
                compensation payments made by such institution that 
                would have been subject to paragraph (1) if the 
                institution had not entered into such an agreement be 
                surrendered to the Treasury.
            ``(5) Reporting requirement.--
                    ``(A) In general.--Any financial institution that 
                is subject to the requirements of paragraph (1) shall, 
                not later than 90 days after the date of enactment of 
                this subsection and annually on March 31 each year 
                thereafter, transmit to the Secretary, who shall make a 
                report which states how many persons (officers, 
                directors, and employees) received or will receive 
                total compensation in that fiscal year in each of the 
                following amounts:
                            ``(i) over $500,000;
                            ``(ii) over $1,000,000;
                            ``(iii) over $2,000,000;
                            ``(iv) over $3,000,000; and
                            ``(v) over $5,000,000.
                The report shall distinguish amounts the institution 
                considers to be a bonus and the reason for such 
                distinction. The name or identity of persons receiving 
                compensation in such amounts shall not be required in 
                such reports. The Secretary shall make such reports 
                available on the Internet. Any financial institution 
                subject to this paragraph shall issue a retrospective 
                annual report for 2008 and both a prospective and 
                retrospective annual report for each subsequent 
                calendar year until such institution ceases to be 
                subject to this paragraph.
                    ``(B) Total compensation defined.--For purposes of 
                this paragraph, the term `total compensation' includes 
                all cash payments (including without limitation salary, 
                bonus, retention payments), all transfers of property, 
                stock options, sales of stock, and all contributions by 
                the company (or its affiliates) for that person's 
                benefit or for the benefit of that person's immediate 
                family members.
            ``(6) Community financial institution exemption.--
                    ``(A) In general.--The Secretary may exempt 
                community financial institutions from any of the 
                requirements of this subsection, when the Secretary 
                finds that such an exemption is consistent with the 
                purposes of this subsection.
                    ``(B) Community financial institution defined.--For 
                the purposes of this paragraph, the term `community 
                financial institution' means a financial institution 
                that receives or received a direct capital investment 
                under the Troubled Asset Relief Program under this 
                title of not more than $250,000,000.
            ``(7) Compensation considerations under the standards.--In 
        establishing standards under this subsection, the Secretary 
        shall consider as compensation any transfer of property, 
        payment of money, or provision of services by the financial 
        institution that causes any increase in wealth on the part of 
        an executive or employee.''.
    (b) Revision to Rule of Construction.--Section 111(b)(3)(D)(iii) of 
the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 
5221(b)(3)(D)(iii)) is amended by inserting before the period the 
following: ``, except that an entity subject to subsection (e) may not, 
while a capital investment described in that subsection remains 
outstanding, pay a bonus or other supplemental payment that is 
otherwise prohibited by clause (i) without regard to when the 
arrangement to pay such a bonus was entered into''.

SEC. 2. EXECUTIVE COMPENSATION COMMISSION.

    Section 111 of the Emergency Economic Stabilization Act of 2008 (12 
U.S.C. 5221), as amended by section 1, is further amended by adding at 
the end the following new subsection:
    ``(j) Executive Compensation Commission.--
            ``(1) Establishment.--There is hereby established a 
        commission to be known as the `Commission on Executive 
        Compensation' (hereinafter in this subsection referred to as 
        the `Commission').
            ``(2) Duties.--
                    ``(A) Study required.--The Commission shall conduct 
                a study of the executive compensation system for 
                recipients of a direct capital investment under the 
                TARP. In conducting such study, the Commission shall 
                examine--
                            ``(i) how closely executive pay is 
                        currently linked to company performance;
                            ``(ii) how closely executive pay has been 
                        linked to company performance in the past;
                            ``(iii) how executive pay can be more 
                        closely linked to company performance in the 
                        future;
                            ``(iv) the factors influencing executive 
                        pay; and
                            ``(v) how current executive pay incentives 
                        affect executive behavior.
                    ``(B) Consideration of proposals.--The Commission 
                shall consider, in addition to any recommendations made 
                by members of the Commission or outside advisers, the 
                effects of implementing increased shareholder voice in 
                executive compensation.
            ``(3) Report.--
                    ``(A) In general.--Not later than 90 days after the 
                date on which all members of the Commission have been 
                appointed, the Commission shall deliver a report to the 
                President and to the Congress containing--
                            ``(i) recommendations for legislative 
                        action;
                            ``(ii) recommendations for executive 
                        action, including actions taken by the 
                        Department of the Treasury or any other agency 
                        for which the Commission has recommendations; 
                        and
                            ``(iii) recommendations for voluntary 
                        actions to be taken by recipients of a direct 
                        capital investment under the TARP.
                    ``(B) Minority views.--The report required under 
                subparagraph (A) shall be accompanied by any separate 
                recommendations that members of the Commission wish to 
                make, but that were not agreed upon by the Commission 
                for purposes of the report required under subparagraph 
                (A). Such separate recommendations must take the form 
                of a proposal for aligning executive pay with the long-
                term health of the company.
            ``(4) Composition.--
                    ``(A) The Commission shall be composed of 9 
                members, appointed as follows:
                            ``(i) 1 member appointed by the Council of 
                        Economic Advisers.
                            ``(ii) 1 member appointed by the Speaker of 
                        the House of Representatives.
                            ``(iii) 1 member appointed by the Senate 
                        Majority Leader.
                            ``(iv) 1 member appointed by the House 
                        Minority Leader.
                            ``(v) 1 member appointed by the Senate 
                        Minority Leader.
                            ``(vi) 1 member appointed by the Chairman 
                        of the Financial Services Committee of the 
                        House of Representatives.
                            ``(vii) 1 member appointed by the Ranking 
                        Member of the Financial Services Committee of 
                        the House of Representatives.
                            ``(viii) 1 member appointed by the Chairman 
                        of the Banking, Housing, and Urban Affairs 
                        Committee of the Senate.
                            ``(ix) 1 member appointed by the Ranking 
                        Member of the Banking, Housing, and Urban 
                        Affairs Committee of the Senate.
                    ``(B) Each appointing entity shall name its member 
                within 21 days of the date of the enactment of this 
                subsection.
                    ``(C) Any vacancy in the Commission shall be filled 
                in the same manner as the original appointment.
            ``(5) Activities.--
                    ``(A) The Chairman of the Financial Services 
                Committee of the House of Representatives shall select 
                one member to serve as the Chairman of the Commission, 
                and such Chairman will call to order the first meeting 
                of the Commission within 10 business days after the 
                date on which all members of the Commission have been 
                appointed.
                    ``(B) The Commission shall meet at least once every 
                30 days and may meet more frequently at the discretion 
                of the Chairman.
                    ``(C) The Commission shall solicit and consider 
                policy proposals from Members of Congress, the 
                financial sector, academia and other fields as the 
                Commission deems necessary.
                    ``(D) The Commission shall hold at least two public 
                hearings, and may hold more at the discretion of the 
                Chairman.
            ``(6) Actions by the commission.--A decision of a majority 
        of commissioners present at a meeting of the Commission shall 
        constitute the decision of the Commission where the Commission 
        is given discretion to act, including but not limited to, 
        recommendations to be made in the report described in paragraph 
        3.
            ``(7) Staff.--The Chair may hire at his or her discretion 
        up to seven professional staff members.
            ``(8) Termination.--The Commission shall terminate 30 days 
        after the date on which the Commission submits its report to 
        the President and the Congress under paragraph 3.
            ``(9) Authorization of appropriations.--There are 
        authorized to be appropriated such sums as may be necessary to 
        carry out this subsection.''.

            Passed the House of Representatives April 1, 2009.

            Attest:

                                            LORRAINE C. MILLER,

                                                                 Clerk.

Summary: (Sec. 1) Amends the Emergency Economic Stabilization Act of 2008 (EESA) to prohibit a financial institution that receives or has received a direct capital investment under the Troubled Asset Relief Program (TARP) (or with respect to the Federal National Mortgage Association [Fannie Mae], the Federal Home Loan Mortgage Corporation [Freddie Mac], or a federal home loan bank, under the Housing and Economic Recovery Act of 2008) from making a compensation payment (other than a longevity bonus or a payment in the form of restricted stock) to an executive or employee under a preexisting compensation arrangement, or from entering into a new compensation payment arrangement, while that capital investment remains outstanding, if such compensation: (1) is unreasonable or excessive according to standards established by the Secretary of the Treasury in consultation with the Chairperson of the Congressional Oversight Panel; or (2) includes any bonus or other supplemental payment, whether payable before employment, during employment, or after termination of employment, that is not directly based upon such standards.

Declares such prohibition inapplicable to an institution that did business with a recipient of a direct capital investment under the TARP, or under amendments made by the Housing and Economic Recovery Act of 2008.

Instructs the Secretary, with the approval of the agencies that are members of the Federal Financial Institutions Examination Council, and in consultation with the Chairperson of the Congressional Oversight Panel, to establish standards governing: (1) unreasonable and excessive compensation; and (2) performance-based measures that a financial institution must apply when determining whether it may provide a bonus or retention payment.

Excludes from the meaning of compensation payment under this Act any severance payment paid upon the employee's dismissal by an employer in the ordinary course of business to an employee who has been employed for a minimum of five years, unless such severance payment is greater than the employee's annual salary or $250,000.

States that the prohibition against certain compensation not based upon performance standards does not apply to a financial institution that has entered into an agreement with the Secretary to repay the United States all outstanding amounts of any direct capital investment or investments it has received under this Act. Declares, however, that if an institution defaults on such an agreement, the Secretary shall require the institution to surrender to the Treasury the compensation payments that would have been subject to such prohibition.

Requires financial institutions subject to this Act to report annually to the Secretary how many officers, directors, and employees received or will receive total compensation over each of five specified thresholds in that fiscal year.

Requires such report to distinguish amounts an institution considers to be a bonus and the reason for such distinction. Authorizes the Secretary to exempt community financial institutions from the requirements of this Act.

Defines total compensation as all cash payments (including without limitation salary, bonus, and retention payments), all transfers of property, stock options, sales of stock, and all contributions by the company (or its affiliates) for a person's benefit or for the benefit of that person's immediate family members.

States that the identity of persons receiving compensation in such amounts shall not be required in such reports.

Directs the Secretary to make such reports available on the Internet.

Requires a financial institution, while subject to this Act, to issue: (1) a retrospective annual report for 2008; and (2) both a prospective and retrospective annual report for each subsequent calendar year.

States that, for a financial institution that has received or receives a direct capital investment under TARP, while such investment remains outstanding, no otherwise prohibited bonus or other supplemental payment may be paid to employees or executives without regard to when the arrangement to pay such a bonus was entered into.

(Sec. 2) Establishes the Commission on Executive Compensation to study and report to the President and Congress on the executive compensation system for recipients of a direct capital investment under the TARP. Requires the report's recommendations for executive action and voluntary recipient actions to be accompanied by any separate minority view recommendations that members of the Commission wish to make, but that were not agreed upon by the Commission for the report.



Authorizes appropriations.