The Office of the Special Master was established by the Secretary of the Treasury to ensure that executive compensation at financial institutions receiving exceptional assistance from the Treasury is structured and paid in a manner consistent with shareholder and taxpayer interests.
The Treasury established the Troubled Asset Relief Program (TARP) pursuant to its authority under the Emergency Economic Stabilization Act of 2008 (EESA) in order to provide immediate liquidity and stability to the financial system. EESA, as amended by the American Recovery and Reinvestment Act of 2009 (ARRA), requires that the Secretary promulgate standards governing executive compensation at financial institutions that have received assistance under TARP.
On June 15, 2009, the Secretary released the Treasury’s Interim Final Rule for TARP Standards for Compensation and Corporate Governance, which sets forth the standards that will govern executive compensation at firms participating in the TARP. The rule established the Office of the Special Master and gave the Special Master specific powers designed to ensure that executive pay at these firms is structured in a way that will protect taxpayers’ investment.
The rule gives the Special Master four important responsibilities. The Special Master has sole power and authority for:
- Review of Payments: For any TARP recipient receiving “exceptional assistance” (an “Exceptional Assistance Recipient”), the Special Master is required to review and approve any payment of compensation to the 5 senior executive officers and 20 next most highly paid employees.
- Review of Structures: For any Exceptional Assistance Recipient, the Special Master is required to review and approve the structure of compensation for all executive officers and the 100 most highly compensated employees.
- Interpretation: The Special Master has interpretive authority over the executive compensation provisions of EESA and the Interim Final Rule. Accordingly, the Special Master will make all determinations as to the application of those provisions to particular facts, and all decisions as to whether their requirements have been met.
- Review of Prior Payments: The Special Master is required to review any bonuses, retention awards, and other compensation paid to the 5 senior executive officers and 20 next most highly-compensated employees of each TARP recipient prior to February 17, 2009, to determine whether the payments were contrary to the public interest. If the payment is determined to be contrary to the public interest, the Special Master will be responsible for negotiating for reimbursements of such payments.
The Special Master may be contacted by email at SpecialMasterExecComp@treasury.gov.