Sherman Statement on Executive Compensation Limits Issued by Obama Administration

Press Release

Sherman Statement on Executive Compensation Limits Issued by Obama Administration

Congressman Brad Sherman (D-CA), the most senior member on the House Financial Services Committee to vote against the TARP legislation, issued the following statement after President Barack Obama called for companies receiving the TARP funds to abide by reasonable limits on executive compensation.

"The President responded to the anger of the American people, demanding that executives at companies receiving TARP funds are limited to $500,000 in total annual compensation until the funds are repaid to the Federal Government. The $500,000 limit is even tougher than I initially proposed. Unfortunately, there are three giant loopholes in the Administration's proposal.

"First, the terms do not apply to firms like Citigroup or AIG who have already received TARP funds, unless they receive even more. Both Citigroup and AIG have both received over $45 billion, and they face no limits on executive compensation if they choose to retain what they have received without seeking more. Section 111 of the TARP legislation requires the Treasury Department to issue regulations providing ‘appropriate standards' for executive compensation applicable to all firms that have received TARP funds. I urge the administration to follow the law and define ‘appropriate standards' for all firms who are holding TARP funds.

"Second, most of the firms who received TARP funds in the future are allowed to pay any amount in executive compensation or bonuses. They are only required to allow their shareholders to vote on a non-binding resolution on executive compensation and can pay unlimited compensation no matter how the shareholders vote. Under the Administration's proposal, only a few firms receiving extraordinary assistance will be subject to the $500,000 limit.

"Third, the proposal has no effective limits on luxury perks. The Administration's proposal simply requires boards of directors to adopt policies on such luxury items as private jets and lavish parties. These are the same boards who have approved these abusive policies in the past, and who are very likely to do so again in the future.

"I look forward to working with the new Administration so that the executive compensation limits proposed by the Treasury Department fully carry out the expressed intent of President Obama."

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