WASHINGTON, DC—The U.S. House today passed the Grayson-Himes Pay for Performance Act, practical legislation that ties executive pay to performance at institutions in which the American taxpayers have ownership. Following last month’s vote that broadly addressed executive compensation, this legislation takes a targeted approach to eliminate incentives that encourage executives to make risky decisions and threaten the company’s viability.
“The Pay for Performance Act is based on a principle we can all agree on—if you perform well, you should be paid accordingly,” said Congressman Himes. “In companies where the taxpayers are now shareholders, we have the right to ensure that people within those institutions are making prudent decisions that will help stabilize and grow their long-term value.”
This legislation helps balance risk and reward in executive pay structures to encourage good performance through well-designed executive compensation systems. The bill requires that executive pay be based on performance standards and reduces incentives for decision-makers to take excessive risk at institutions that have received funding from the TARP. The bill requires the Secretary of the Treasury to develop standards to measure both the performance of the employee and the stability of a financial institution, including its ability to repay the U.S. government for any investment, before paying bonuses.
“Our goal is to create a smart regulatory structure that ensures American taxpayers never again shoulder the burden of a private company’s risk,” said Congressman Himes. “Those who take risk should gain the benefit and bear the losses of their decisions.”
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