Treasury Department And SEC Move Forward On Executive Compensation Reform

On June 10, the United States Treasury Department (Treasury) and the Securities and Exchange Commission (SEC) announced new rules for companies receiving funds under Treasury's Troubled Asset Relief Program (TARP) and initiatives to reform executive compensation, which reach beyond the financial sector.

Reforms Announced and Legislation Proposed

Treasury Secretary Timothy Geithner issued a statement indicating that the executive branch will be considering executive compensation reforms with the goal of "bringing compensation practices more tightly in line with the interests of shareholders and reinforcing the stability of firms and the financial system." Secretary Geithner indicated that such reform will be guided by the following principles: (1) proper measurement and reward of performance; (2) accounting for the time horizon of risks; (3) alignment with sound risk management; (4) reexamination of "golden parachutes" and supplemental executive retirement packages;