Legal Alert: Executive Compensation under the Emergency Economic Stabilization Act of 2008 - Executive Summary

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Financial institutions electing to participate in Congress's recently enacted efforts to stabilize this industry, the Troubled Asset Relief Program (TARP), must agree to four specific restrictions on executive compensation:

1. No incentives that involve "unnecessary and excessive risks."

2. "Claw back" provisions to recoup compensation paid.

3. No "golden parachutes" in certain severances of employment.

4. New $500,000 limit on amount of deductible compensation. IRS Notice 2008-94, issued on October 14, 2008, addresses and clarifies certain issues and definitions presented by the TARP, under which eligible financial institutions may sell or obtain insurance from the Treasury Department on troubled assets they own. Treasury Department Notice 2008-TAAP and Notice 2008-PSSFI, issued October 16, 2008, each relate to particular aspects of the TARP, and the Interim Final Regulations, published October 20, 2008, relate to the executive compensation rules for institutions involved in the TARP.

Please see full alert for more.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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