Academic journal article Vanderbilt Law Review

Symposium on Executive Compensation Keynote Address

Academic journal article Vanderbilt Law Review

Symposium on Executive Compensation Keynote Address

Article excerpt

I want to thank Richard Nagareda1 for inviting me to Vanderbilt; he's an old friend. I am very honored to return to Vanderbilt. I taught a course at Vanderbilt, and I loved teaching here. I loved going to the Country Music Hall of Fame and learning more about Patsy Cline and Johnny Cash. Really, it was great. I've already received an invitation from Dean Jim Bradford2 to come back to the business school and the law school and to participate in an interdisciplinary look at executive compensation. I hope to return.

But when I saw that the Vanderbilt Law Review was hosting a symposium on executive compensation - an academic look at executive compensation - I just couldn't resist carving out a few minutes to come spend some time with the experts, learning where they're coming from on this important issue. I'm not accustomed to an academic look at executive compensation. I'm used to dealing with the practical, substantive, and political problems associated with executive compensation.

Today, I'd like to make a few preliminary points about executive compensation and the limits of my role as the Special Master for TARP Executive Compensation. The title Special Master is an interesting one. But, although I am the Special Master for TARP Executive Compensation, it's important to understand my very limited role in approving executive compensation packages.

I am responsible for issuing compensation determinations pursuant to a federal law,3 and that federal law says that the Special Master, under the authority delegated by the Secretary of the Treasury, shall make compensation determinations, but only as to seven companies that received the most financial help from the taxpayer under TARP: (1) Bank of America, (2) Citigroup, (3) AIG, (4) GM, (5) GMAC, (6) Chrysler, and (7) Chrysler Financial.4 In 2009, I had seven companies where I made compensation decisions, but pursuant to that statute, Bank of America and Citigroup completely repaid their financial obligation to the taxpayer, and thus I no longer have any authority over their compensation decisions.5 They are out. They are no longer subject to my determinations. They repaid the taxpayer.6 They raced to do it. Fine. That's always been the primary objective. Get the taxpayer's money back. So in 2010, I have only five companies where I am authorized to make compensation determinations .

But, it's also important that you understand the limits of my authority even as to those five companies. First, for each of these five companies, I am required to calculate compensation packages for the company's top twenty-five earners.7 Twenty-five, that's all. Second, the statute says that I shall design compensation structures, but only for employees twenty-six to one hundred in those five companies.8 One hundred people in each company. Thus, my mandatory jurisdiction is quite limited by federal law.

Now, the third statutory delegation that I have is purely advisory. I may - not shall - seek to claw back or recover compensation that was paid to any corporate official in any of the 400 plus companies that received TARP assistance.9 I have publicly stated I may do that as to those companies where there are egregious examples of excess compensation.10 We shall see. But that's it. That's my total role.

Now, with such a limited role, why is there such interest at Vanderbilt and everywhere else in what I am doing? I believe there are two main reasons why the interest in my role is out of proportion to my limited jurisdiction and authority. First, the United States is in a time of great economic uncertainty. Every day you read the newspapers, and you see an uncertain picture of the economic future of this country. With that level of uncertainty, a high unemployment rate, and with job security so problematic, it fuels anger and frustration on Main Street as to what is happening on Wall Street.

The second reason is very interesting. I am the only government official that I know of that has authority to calculate individual compensation for individual employees. …

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