Pay for Performance Act

Floor Speech

PAY FOR PERFORMANCE ACT -- (House of Representatives - April 01, 2009)

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Mr. SHERMAN. This bill does three things. First, it requires the issuance of regulations defining excessive and unreasonable compensation and applies them only to those who are holding our capital. As the Chairman pointed out, similar legislation is already law and was voted in favor of by the Republican leadership.

The bill we passed in October of last year specifically required the Treasury to issue appropriate standards for executive compensation--not for every company in America, but for those that are holding our money. Clearly, this new language will provide additional impetus for Treasury to issue appropriate regulations.

There are other things the bill does. First, it deals with excessive bonuses and the provision that Senator Dodd is now famous for having added to the recovery legislation.

As I think every Member of this House knows, Senator Dodd had a provision that he added--and he was prevailed upon to cause his provision not to apply to preexisting contracts.

Since then, those on the other side of the aisle have done two things that strike me as inconsistent. They have denounced Senator Dodd's amendment and the philosophy behind it, and they have denounced the fact that it doesn't apply retroactively to preexisting contracts. This is like announcing that you detest the taste of broccoli and complaining that you didn't get a double helping. It makes no sense except for those who simply want to find something to denounce.

This bill eliminates the exception that Senator Dodd has been so viciously criticized for by the other party. If you vote against this bill, then you are embracing the very exception that many of you have been vilifying.

Third, this bill has a disclosure provision that I authored. It says that companies that are holding our TARP money must disclose how many of their employees are getting a total compensation package of over $5 million; how many have a total compensation package of over $3 million; how many over $1 million. Why? Because if the American people are putting up the money, they have a right to know.

Now the self-styled ``defenders of capitalism'' say that we've got to protect these companies from the influence of the taxpayer. How is capitalism actually supposed to work? Those who provide the capital and take the risk are supposed to have some control. That's real capitalism. The taxpayers are taking the risk with these companies. We hope to get our money back. As soon as we do, the companies can operate as they will.

Instead, we're told that we need a kind of cancerous capitalism--a system that works like this: Socialism for the risks, capitalism for the rewards.

I don't think Adam Smith would have voted for the TARP bill. The gentleman from Alabama did. I voted against it. But I do think that economist Adam Smith--not our colleague from Washington--would vote ``yes'' on this bill because those who provide the capital should control--or have at least some control--of the enterprise. And that includes some control over compensation.

To say instead that firms should take our money but not listen to our ideas on how it should be used, that isn't capitalism. That is socialism for the rich.

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Mr. SHERMAN. I thank the Chairman.

I think a lot of us would like companies to repay the TARP money as quickly as possible. I think that's true of those who voted against the bill, and I think it's true of many of those who voted in favor of it. And I might support this amendment if it was one that required companies to repay in a 6-month schedule, or a 1-year schedule.

But this amendment allows companies to escape all the provisions of the bill just by entering into a schedule of repayment that could be a 10-year schedule or a 15-year schedule. And I don't think that a company should be able to escape the bill just by repaying us the money over the next 10 or 15 years. After all, all of the companies who got the TARP money are supposed to be repaying it; many of them in a shorter period than over the next 10 or 15 years.

Fairness would say that we should not treat a company that's repaying us over a 15-year schedule differently than a company that has not entered into a particular repayment schedule.

So I would hope that we would defeat this amendment because the amendment, as written, would allow a large number of companies to escape the effect of the bill without doing much more than making a few monthly payments, potentially of a very small amount.

As to the issue of retroactivity, there is much discussion over what happened in the Senate, but here in the House, we didn't vote for this version of the Dodd amendment or that version of the Dodd amendment. We just had the conference report before us.

Those of us who voted ``yes'' on the conference report at least voted for a provision that would prevent crazy bonuses in the future. And there are many Members--in fact, the entire Republican side of the House who voted against the stimulus bill. That means they voted against a provision that would prevent huge $6 million AIG bonuses in the future. And their only excuse is, well, they would have hoped for an amendment that would have prevented the bonuses in the past.

When a bill comes before us that would prevent $6 million bonuses from being paid to AIG executives in the future, and you vote against the bill, it is a very small fig leaf to say that you are nonetheless opposed to excessive bonuses.

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