A Matter of Simple Fairness

By a vote of 247-171, the House passed the Pay for Performance Act this afternoon. This legislation amends 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 at companies that receive capital infusions from the Treasury. While such a capital investment is outstanding, and regardless of when a compensation payment arrangement was entered into, recipients of a direct capital investment from the Treasury would be prohibited from:

Paying any executive or employee any compensation that is "unreasonable or excessive"

Paying any bonus or other supplemental payment that is not directly based on performance-based standards

Entering into new contracts for compensation that are "unreasonable or excessive or not performance-based

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Rep. Alan Grayson (D-FL):

Rep. Grayson: "We offer HR 1664, the Pay For Performance Act, based on two simple concepts. One, no one has the right to get rich off taxpayer money. And two, no one should get rich off abject failure. The U.S. Government spent $170 billion to stabilize AIG, and it now owns 80% of that company, yet recently AIG paid more than $165 million in bonuses to 73 employees with this taxpayer money. We should not be paying arsonists to put out his own fire, and we should not be paying an executive to ruin his own bank."

Rep. Jim Himes (D-CT):

Rep. Himes: "The only question that matters is, should we look after those dollars? Should we as the Representatives of the American people, look after their dollars to make sure that they are used wisely? The answer to that question must be yes. HR 1664 says one thing to TARP recipients, one thing. Pay your people, but do so reasonably and according to their performance. Pay reasonably and according to performance."

Speaker Pelosi:

Today the House took another step toward better protecting the taxpayer with the Pay for Performance Act. This legislation adds new compensation and bonus restrictions to financial institutions that receive direct investments from the Treasury Department and applies these limits regardless of when the company agreed to pay a bonus.

This is a matter of simple fairness. If American autoworkers are expected to reduce their pay and benefits because the industry is in trouble, then a senior executive at financial institution can forgo a bonus when their company is in dire straits and supported by the taxpayer. Executives at institutions receiving taxpayer funds should be able to abide by the reasonable restrictions on their compensation that are contained in this bill.

The Pay for Performance Act is the right thing to do for taxpayers and to restore stability and investor confidence in our financial markets, which are essential to our economic recovery.