Executive Compensation Provisions In The Emergency Economic Stabilization Act Of 2008

Summary:

Last Friday, President Bush signed the Emergency Economic Stabilization Act of 2008 (the "Act"). The Act imposes on financial institutions new executive compensation and corporate governance standards and amends the deductibility limits and golden parachute provisions under the Internal Revenue Code. The standards the Act impose differ based on whether the Secretary of the Treasury directly purchases troubled assets or whether such assets are purchased through an auction.

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The Emergency Economic Stabilization Act of 2008 (the "Act") imposes new executive compensation and tax requirements on any financial institution that participates in the "troubled asset relief program" ("TARP"). A financial institution generally becomes subject to the Act when the Secretary of the Treasury (the "Secretary") purchases troubled assets from the financial institution. The Act imposes standards on these institutions for executive compensation and corporate governance