TARP Compensation and Corporate Governance Standards Released

The U.S. Treasury released its proposed TARP standards for compensation and corporate governance yesterday. Among other requirements, the standards require members of the company's board compensation committee to sign the following certification.

“The compensation committee certifies that:

(1) It has reviewed with senior risk officers the senior executive officer (SEO) compensation plans and has made all reasonable efforts to ensure that these plans do not encourage SEOs to take unnecessary and excessive risks that threaten the value of [identify TARP recipient];

(2) It has reviewed with senior risk officers the employee compensation plans and has made all reasonable efforts to limit any unnecessary risks these plans pose to the [identify TARP recipient]; and

(3) It has reviewed the employee compensation plans to eliminate any features of these plans that would encourage the manipulation of reported earnings of [identify TARP recipient] to enhance the compensation of any employee.”

TARP recipients should brace themselves for more requirements such as these.  In addition, board members should begin educating themselves about their new responsibilities and potential liability.  Wheelhouse Advisors can help your institution navigate the new requirements successfully.  Visit www.WheelhouseAdvisors.com to learn more.